REVOLUTION IN THE PENTAGON:

MCNAMARA AMD THE MILITARY BUDGET

A Thesis

Presented to the Faculty of the Department of Political Science

University of Houston

In Partial Fulfillment

of the Requirements for the Degree

Bachelor-of Arts:with Honors

Daniel Martin

May, 1970

545434 REVOLUTION IN THE PENTAGON:

MCNAMARA AND THE MILITARY BUDGET

An Abstract of a Thesis

Presented to the Faculty of the Department of Political Science

In Partial Fulfillment

of the Requirements for the Degree

Bachelor of Arts with Honors

by

Daniel Martin

May, 1970 ABSTRACT

The thesis attempts to accomplish three goals. First,

it tries to analyze the changes which McNamara hoped to make

in the defense budget. Second, it analyzes the McNamara budgets

to decide how successfully the changes were implemented. Third,

it spells out khat the lessons of McNamara's experience are for future civilian control of the Department of Defense.

In order to analyze McNamara's changes, the budget for

Fiscal Year i960 is given as it was formulated so that there can be a base with which to compare McNamara. The conclusion of this chapter is that Secretary of Defense McElroy was unable

to control the military influence and that there was little civilian control within that budget.

' Then the changes McNamara wanted to make are given as he proposed them. They consist of a three-part program of Planning,

Programming, and Budgeting. In addition, there were some, specific policy changes which he hoped to make, including an expanded limited war capability and a stronger missile deterrent.

Finally, McNamara's budget procedure is given to analyze how successfully the changes were implemented. The conclusion

is that McNamara was able to implement the changes which required a direct result, but was not able to implement changes in pro­ cedure. The reason was that, as one man, he was unable to enforce changes which would have to be watched constantly and over all outputs. As a result, the only hope for civilian control 2 of the Pentagon is to abandon the hope for control of outputs and to devise some way to change the goals of the services so that they will want to produce the results which the civilian leaders want. TABLE OF CONTENTS

CHAPTER: PAGE I. INTRODUCTION ...... 1

II. PRE-MCNA^ARA BUDGETS...... 10

III. MCNAilARA'S PLAN...... 47 IV. MCNAIiARA'S BUDGET...... 69

V. POLITICS IN THE PENTAGON...... 106 BIBLIOGRAPHY...... 115 CHAPTER I

INTRODUCTl ON

The Department of Defense has remained, since its forma­ tion in 19^7. perhaps the most awkward alliance in the Federal

Government. The Department merges civilian and military per­ sonnel, each with their own constituency and each with their own conviction that they can best handle the affairs of the nati-n's defense. For that defense the Department maintains an entrenched bureaucracy of military personnel well versed in the requirements of superior military might. The problem arises from the American Constitutional principal of civilian control of the military. In effect, the military men who earn their rank by their ability to prepare for war answer to civilian leaders who have traditionally considered war to be the least desirable of alternatives. It may well be stated that the guiding principal of the National Security Act of 19^7, apart from the desire for coordination, was to firmly establish a meaningful civilian control over the American military machine.

In the first twenty years of the Department, eight differ­ ent men served as the Secretary of Defense.Each brought his own aspirations, his own plans, and his own interpretation of his role. However, in that long list of Secretaries, only two

This thesis does not permit coverage of each. For such information, see: C. W. Borklund, Men of the Pentagon (New York, 1966). 2 were so bold as to attempt to step beyond the role of civilian 2 administrator and into the role of military decision-maker.

The first was Secretary Forrestal, who served the initial term beg inning in 19 A 7.

However, this thesis is concerned with the second of those men, Robert Strange McNamara. More specifically, it hopes to spell out the changes McNamara hoped to establish in the Penta­ gon, how successfully he imp 1 cm i ted them, and what his successes and failures implied about the fossibi1ities of civilian control over the Department of Defense.

Robert McNamara seems an excellent choice for this type of study for two reasons. To begin, in his extraordinarily long tenure as Secretary from 1®61 to 1968, he gained a degree of control never before experienced in the Pentagon. Through the use of his own friends and advisors placed in the traditional

Pentagon offices, he managed to change the face of the entire Pentagon establishment.* 1* Since he was the most successful

Defense Secretary in terms of individual power, the study of his technique could prove fruitful in analyzing political power in the Pentagon.

The second reason why McNamara's tenure can be useful for

2 Pxobert J. Art, The TFX Decision (Boston, 1968), p. 166.

^Vincent Davis, The Adm ira1s Lobby (Chapel Hill, North Carolina, 1967), p- 23^; and Douglas Kiker, "The Education of Robert McNamara,*' Atlantic, CCXIX (March, 1967) > p. 51. L Douglas Kiker, Atlantic, p. 51. 3 studying power in the Pentagon is that he most clearly stated in a systematic form exactly what changes he was hoping to bring about. McNamara had left the business world to enter the Department, and he brought with him a formula for procedure known as P I anning-Programming-Budgeting - Systerns (PPBS). This formula dealt with changes in the budgetary procedure, and for that reason, the paper will be primarily concerned with form­ ulation of the defense budget. However, this does not limit the scope of the paper significantly since decisions within the Pentagon deal with either budgetary considerations or dis­ persal of existing equipment. However, with minor exceptions, even dispersals eventually must be included in the budget since all equipment must be maintained and replaced. For this reason, consideration of the budget effectively covers the vast majority of Pentagon decisions.

The full implications of PPBS will be presented in the chapter on the subject. However, some details can be given at this time to focus the scope of the study from the beginning.

Within the planning phase of PPBS, McNamara hoped to establish a military plan to be revised each year which could be used as a guideline for drawing up the budget. The Programming phase consisted of an intention to change the categories into which the budget was divided so that the new categories would better reflect the military goals of the Department. In this way, he hoped it would be easier to determine how effectively each goal was being accomp1ished. The third phase of the change. Budgeting << was an attempt to implement scientific analysis into the budget­ making process to induce more efficiency. Specifically, he wanted to establish systems analysis and cost/effectiveness as normal procedures for deciding between alternative weapons systems to accomplish defense goals. The full meanings of these terms will be given in the chapter on McNamara's plan for change.

In order to develop this investigation, several factors will have to be investigated. This is a study of the changes

McNamara made in budgeting procedure. In order to decide what constituted a change, some chronology of the formulation of pre-McNamara budgets will have to be given. This will be done in the second chapter. To aid in this task, the Fiscal Year

(FY) I960 budget request will be examined in some detail. There were two reasons for selecting this specific budget as a base.

Firstly, in time span, this was the closest to McNamara's tenure to be completely formulated and Implemented previous to the

Kennedy Administration. In effect, this serves to reduce out­ side variations to a minimum. Of course, it would be unrealistic to assume "all other factors equal" over a period of years, and for this reason extra care must be taken to eliminate the remain­ ing variations. Secondly, there is considerable evidence that the FY i960 budget request was fairly representative of budgets in the later 19505.* The Secretary of Defense and the Deputy

Secretary of Defense claimed as much before the House Appropria­ tions Subcommittee when they stated: 5

Secretary [of Defense! McElroy.... The basic approach, however, to the considera­ tion of service proposals was not any dif­ ferent than in past years. Mr. McNeil can speak from much broader experience than I can as to whether there was any basic difference. Mr, [Deputy Secretary] McNeil . 'There was no basic difference in our procedures.5

In addition to the stable procedures, the results were

stable in both the percentage of the Federal budget devoted

to the Defense Department and the split of that budget among the military services/ However, to avoid being misleading,

it should be noted that there was some variation within the

traditional budget divisions.

Title of Division: 1 58 Request *60 Request % Rise in millions in millions

Military Personnel $11,572 $11,965 2.5U Oper. and Main ten. 10,237 10,5I»2 2.85 Procurement 11,051* 13,348 20.7 Research, Develop., "2,253 3,772 66.8 . Test, S Evaluation Military Construction 2,086 1,563 -40.05 *7

It should be noted at the first that the history of the

budget will be rather selective in what it emphasizes. The

purpose is that certain procedures and events were considered crucial in the McNamara plan for change, and these are given

5U. S. Cong ress. House, Subcommittee of Appropriations Committee, Pepartment of De fense Appropriations for I960, Part I 36th Cong., Ist se s s. , p. 123. Underlining is added.

^William Kaufmann, The McNamara Strategy (New York, 196A), pp. 22-23.

^Figures from Department of Defense Appropriations for I960, Part I, p. 157 The form and percentages are the autnor's. 6 more attention. If this makes the presentation seem uneven or choppy, the reader can only be asked to wait until the later chapters to see the reasons for the emphasis.

Using the FY i960 budget as a base, the changes McNamara

intended to make will be spelled out in detail. In order to accurately portray McNamara's intentions when entering office,

it will be necessary to combine economic theory with practical

Issues of the time. However, this paper is clearly concerned with the theoretical changes which McNamara hoped to bring

about, and the individual issues will be used only as specific examples of the results which McNamara wanted to see.

The fourth chapter will then cover the budget procedure as it existed under McNamara for the purpose of comparison to

tel! the changes which took place. Once again, focusing on one year will be necessary to make the task manageable. In

this case, the fiscal year is 1963, and there are several rea­ sons for the choice. First, it is the closest year to the other period being studied. In fact, with original requests for the

FY 1963 budget estimates going out in January of 1961, McNamara

began working on this budget as soon as he became Secretary.

Second,, despite the early date, McNamara's architecture was g clearly showing through by this time. Third, by this time,

McNamara was still more concerned with implementing his own

George C. Wilson, "Defense Budget May Aid Service Unity," Aviation Week and Space Technology, LXXVI (January 15 , 1962) , p^ 23. 7

changes than with reacting to his own experience in office.

Since this was his first complete budget, he had little experience

to use. Lastly, there was no major war at this time to twist

his priorities.

The fifth chapter is one of conclusion. Comparisons made

in the fourth chapter will be combined into general statements

about the effectiveness of McNamara’s program, in both programs

and purposes. In addition, implications will be drawn about

the lessons of the McNamara experience for other people trying

to control the Pentagon.

The research for this thesis comes from three major sources.

Firstly, there is an extensive list of books covering the Penta­

gon and McNamara’s relation with it. Secondly, in the midst of

the changes, extensive articles in various periodicals covered

the events to the extent of their interest tn the field. Thirdly,

the House Appropriations Hearings provided invaluable informa­

tion as to the specific people involved.

Of course, there are serious problems involved with each.

Both books and periodicals serve as secondary information with

the prior editing and bias which that involves. In fact, the

secondary information unveiled on this topic showed an incred­

ible amount of scholasticism and repetition revealing little

research but a tremendous sense of security in numbers. What

was perhaps most ironic was that many sources agreed that there was no relevant investigation into their topics. Instead, they 8

re 1 i ed on their own overall judgements.For that reason, in many cases, traditional unanimous conclusions will be rejected because they do not correspond to the primary information.

On the other hand, the primary information in the govern­ ment hearings suffers from a tremendous credibility gap. Apart

from the obvious bias of people directly involved, censorship of the testimony made study of decisions then considered vital extremely difficult. In addition, in the full tradition of

Catch 22, things were occasionally deleted for no apparent rea­

son, and often after just having been revealed. However, of a more serious nature, there was also some question in 1959 and

1962 as to exactly how free the military personnel were to re­ veal their true feelings. This problem will receive much more

attention in consideration of the individual budgets. Finally,

the hearings consist of the raw data and testimony which must

be edited by this author. In view of the limited time and vast

quantity of material, this was often difficult.

In short, the literature of this field was judged to be

sadly deficient. McNamara was neither a God nor a devil. The

preliminary judgment of the man prevalent in most of the liter­

ature caused it to degenerate into hero-worship rather than an

attempt at objective analysis.

^Allen Schick, "The Road to PPB: The Stages of Budget Reform," Pub 1i c Administration Review XXVI (December, 1966) , p. 257; and Aaron W i 1davs ky, ^The Political Economy of Efficiency: Cost-Benefit Analysis, Systems Analysis, and Program Budgeting," Ibid., p. 306. 9

Many of the tests used in this paper seem never to have been used before. Due to the lack of precedent, they will undoubtedly have some faults. However, a beginning must be made somewhere, and that is the goal of this thesis. CHAPTER II

PRE-MCNAMARA BUDGETS

As stated earlier, the purpose for analyzing budgets before the McNamara era is to outline a system which can be used to compare with the McNamara budgets to tell which changes were made. This purpose carefully defines what will be emphasized in this budget. In effect, this analysis will concentrate on what was later considered important in the McNamara years.

However, the full details of the McNamara years will not be revealed until the following chapters. For this reason, the only way to organize this chapter without the details of the later chapters is to state what will be emphasized and why.

First, the chapter will discuss historical civi1-mi1itary rela­ tions in the Pentagon because of the psychological effect they have had-on all actors in both budgets. Second, the role of planning will be covered in budget formulation since this was one of the points that McNamara hoped to change. This will include the role of plans and budget ceilings in deciding alloca­ tions. Third, since McNamara also wanted to change the basis for making allocations and procurement decisions, these will be covered. Finally, the ability of all parties to present their cases in budget disputes will be emphasized. However, these are not the only points in the chapter. In effect, the chapter is organized as a chronological review of the budget formulation with emphasis on the points already mentioned. 11

Technically, budgets formulated under the Department of

Defense go back to Fiscal Year 1949. Before that time, the War

Department and Navy Department submitted Individual budgets. By the time McNamara took office in 1961, the Department had gone through seven Secretaries and three major legislative changes.

Therefore, it would be literally impossible to develop one model of budget formulation to cover the entire period. At dif­ ferent times in that period, it was formulated in different ways.

As an alternative, and for reasons explained in the "Introduction", this analysis shall focus on procedure as it functioned in the final year of the period.

However, the formative years cannot be ignored. Several events took place duri-ng the formulation of the FY 1949 and

FY 1950 budgets that still affect relations within the Depart­ ment on budgetary matters. To begin, several challenges by the services were launched early in an attempt to overrule the

Secretary of Defense, and this caused a perpetual feeling of hostility leading to an attempt to censor military opinion in judgment.

The first such challenge occurred in the 70-wing Air Force controversy in 19^9.’^ When Forrestal took office, there was a drive underway to cut back the strength of the Air Force.

Forrestal seemed to try to allow the cuts to go through quietly,

°Warner R. Schilling, "The Politics of National Defense: Fiscal 1950 ," in Warner R. Schilling, et al., Stra tegy, Politics, and Defense Budgets (New York, 1 962) , pp.T2-43. 12 but the Air Force would have no part of it. In the Congressional hearings on the budget, the Air Force officers flatly contended to the embarrassment of the new Secretary of Defense that 70 wings of aircraft were the absolute minimum that could be al­

lowed for the defense of the country. in the short run, the

Air Force won the battle. Money was appropriated for a 70-wing

Air Force. However, the Air Force overlooked the budgetary powers of the President and the new Secretary of Defense. The money allocated for the new aircraft was held back under the

Secretary’s dispersal power and was never spent.”

The second major challenge was the “Revolt of the Admirals" which took place in 19^9.14 Soon before the Congressional hearings of that year. Defense Secretary Louis Johnson cancelled plans for an aircraft carrier requested by the Navy. In an

instance of bad timing, this occurred in conjunction with a drive by the Air Force to take over some of the air power ad­ ministered by the Navy. During the Congressional hearings, the

Navy led by Admiral Arleigh Burke presented a great amount of support for its claim that the carrier was vital. Once more,

the service won and the carrier actually was built.

* * Ib i d., pp. A6-47. 1 2 Jack Raymond, Power at the °3n tagon (New York, 19^^) , pp. 198-99. On each of these historical events only one source is used. The reason for the scarce documentation is that the only truly significant point about them for this paper is that they happened at all. The fact that there was conflict was significant for future personnel, regardless of the specific events which took place. 13

As a result of all this, the services became naturally convinced that appeal over the head of the executive authorities was a legitimate and fruitful tactic. The reaction to all this figures heavily in the relative power of Secretaries, and will be handled in detail in consideration of the separate budgets.

Three other major changes figured heavily in the outlook of the defense budget in later years. The first was a political change which occurred in the late 519^0* and became evident in the FY 1950 budget. With the advent of the Truman Doctrine and the Marshall Plan, the United States accepted responsibility for protection of its allies from the Communist bloc. Such a duty required constant preparedness for war, and by the FY 1950 budget, there was a very clear intention of supporting that

*^preparedness. / However, it should not be assumed that the military was given an open budgetary hand. Appropriations were quite low and continued to be pressed by budget ceilings and public indignation at spending. Compared to the $50 billion-plus budgets of the

McNamara period, the figures for the FY 1950 budget are quite sma11 :

Army $4.5 bt I 1 i on Navy 4.5 b i11i on Air Force 4.6 billion

• *^Warner R. Schi1 Ii ng , Strategy, Politics, and Defense Budgets, p. 10. lli

Other and OSD* $ 0.6 billion Total $1 <1.2 billion'11

The second major change, also, occuring in the FY 1950 bud­

get, was a change to a performance budget. The performance

budget was a change in the categories in which the budget for

defense was divided, in reaction to what was considered to be a

confusing and meaningless division as had been used before FY

1950. Specifically, the budget replaced appropriation by agency with appropriation by general function. Before FY 1950, the

budget had appropriated funds for bureaus and agencies within

the services. For instance, under the Army division were appro­

priations for the Quartermaster Corps, the Transportation Corps,

the Ordnance Service and Supplies, etc. In order to make any

sense out of what the categories meant, Congress worked out a / rough rule-of-thumb that they would compare the budget with the

previous•ones and question the reasons for the changes they

found.

The FY 1950 budget ended this division and changed to a

budget which was interservice in nature and broken down by func­

tion instead of unit.*5 The final defense-wide categories were:

Military Personnel; Operation and Maintenance; Procurement;

Research, Development, Test, and Evaluation; and Military

Pi Ibid., p. 52. *OSD is the common abbreviation for the Office of the Secretary of Defense, which includes the Secretary and his staff. ^Harry Howe Ransom, Can Amer i can Democ racy Survive the Co 1 d Va r ? (Garden City, New Yor k , 1 96 p7 89 . 15

Construction. The changes were widely praised and actually did make the budget much easier to understand.^

The final change of significance before entering the spe­ cific budget in question was the Reorganization Act of 1958 passed by Congress. The functional purpose of the Act was to redefine the chain of command in the Department of Defense, placing more military functions in the chain leading up to the

Secretary of Defense instead of having them end with military ^*personnel. By the time of the consideration of the'FY I960 budget, the changes in command structure were in operation.

However, the effects of this were open to a considerable vari­ ance of opinion. The conclusion of this paper is that the ef­ fects were rather meaningless.

There can be little doubt that the changes prescribed ef­ fectively took place. The Secretary of Defense through his staff became the final authority over a great number of troop commands and budgetary decisions which had formerly been ruled by the military. In effect, this gave the increase in power which he referred to when questioned about the Act in the FY 1 3 i960 budget hearings. In addition, there was undoubtedly sone additional coordination caused by this unification of

lbArthur Smithies, The Budgetary Process in the United States (New York, 1955), pp. 232-33.

’^william Kaufmann, The McNamara Strategy, p. 23.

1 8 Department of Defense Appropriations for I960, Part I, p. 173. 16 service projects as proudly claimed by Deputy Secretary Quarles at the same hearings.^

However, what is misleading about both statements is that they were both made by people gaining power in the Act. When the personnel of the Services were asked about whether the Act had shifted any power, the answers were substnatia 1 Iy different.

To use the example of the Navy:

Mr. Os ter tag. Admiral Burke and Mr. Sec­ retary, both of you may be willing to com­ ment as to the effect of the reorganization in the Defense Establishment on the Navy. Has there been any significant change or relationship, good or bad, with regard to the application and effect of the reorgani­ zation law and plan? Secretary Gates. There has been no notice­ able effect, FiT. Ostertag.... We are doing business approximately the same way we did before, with the exception of the command line.215

The problem seems to be, as will reappear throughout this study, that while specific moves can gain specific powers, too much X goes on in the Department of Defense for one man to supervise.

While the Secretary became the head of the command line, pro­ cedures forced so many decisions to be made before they reached the top level that the powers of the Secretary were largely meaningless. Even at the high level of the Secretary of the

Navy, "we are doing business approximately the same way we did

^Department of Defense Appropriations for I960, Part I, p. 178.

Department of Defense Appropriations for i960, Part I, p. 615. 17

before

The implementation of the Reorganization Act of 1958 led directly into the formulation of the FY i960 budget. There is

a general pattern followed throughout the executive departments

for the development of each year’s budget. For general refer­ ence, one of the better common listings is given here to serve as a framework from which to become more specific. The example given is in reference to the FY 1961 budget, and each date is moved back one year to make it applicable to FY i960.

Jul 57-Oct 57 Joint Chiefs of Staff devel­ opment of objectives, force­ levels, and war plans, based upon broadly stated Presiden­ tial (NSC) policies and Defense Secretariat guidance on major’ military functions and missions. Nov Jan57* 58 Development of war plans, pro­ grams, and requirements within the separate Army, Navy, Air Force, and Marine Corps. . Feb 58-May 58 Program revision takes place, meanwhile, to reflect Presi- dentia'l decision on the previous year’s budget request. Feb 58-Jul 58 Development of Budget estimates in the field by each of the services and the separate com­ mands. Jun 58-Sep 58 Review within each military department (and incorporation of revision as necessary.) Sep 58-Nov 58 Department of Defense and Bureau of the Budget review. Dec 58 Final composition of President’s annual budget. Jan 59-Jun 59 Congressional consideration of President’s budget for FY i960. Jul 59”Jun 60 Apportionment and obligation of funds (may continue for sev­ eral additional years in case 18

of continuing appropriations.I

However, this is an incomplete description of the budget process. Within the framework of this schedule, two subjects at the very beginning arise and need immediate attention. The first is the process of setting budget ceilings; the second is the significance assigned to the military plans devised by the

Joint Chiefs of Staff.

To begin, the schedule completely forgets to mention budgetary ceilings. In the period described as Feb 58-Jul 58, the Secretary of Defense issued "budget guidelines" to ac­ company the beginning stages of monetary considerations by the 9 9 military departments. In fact, these budget "guidelines" were often issued before the results of the military plans were 23 even known.

The exact nature of how restrictive these "guidelines" were will be discussed later. However, the concept of a budget ceiling was not new. In the FY 1350 budget discussed earlier,

it was known as early as 19A8 that there was a ceiling as well 2k. as what the amount was. Eisenhower's budgets were heavily

Harry Howe Ransom, Can American Democracy Survive the Co 1d War?, p. 9k.

2 2 Charles J. Hitch and Roland M. McKean, The Economics of Defense in the Nuclear Age (New York, i960), pp. k5”k6.

^Harry Howe Ransom, Can American Democracy Survive the Cold Var?, p. 98. ^^Warner R. Schilling, Strategy, Politics, and Defense Budgets, pp. k7~k8. 19 ceiling oriented, and I960 was no exception.

There were some good reasons for using ceilings at this time, although the Eisenhower Administration would never admit to using them. First, the executive went into the budget pro­ cess with predetermined limitations from public expectations about how much should be spent on defense and the continuance 2 6 of existing programs. In fact, the limitation from existing programs was extremely strong. The average weapon system spent seven years between the beginning of research and final pro- duction. Therefore, it was very difficult to change a great number of projects in any one fiscal year without wasting money already spent. Another limitation of existing programs was that there were so many systems to investigage that one person could not possibly understand and compare them all. Mistakes in this type of procedure were easy to make and often quite costly. Therefore, there was a strong tendancy to continue old systems and change to new ones only after the need for them became obvious.^8

One last possible argument for ceilings was that the

25 Harry Howe Ransom, Can Arner i can Democracy Survive the Cold War?, p. 118. 2 6 Warner R. Schilling, Strategy, Politics, and Defense Budgets, p. 96.

C. W. Borklund, The Department of Defense (New York, 1968), P. 176.

^°Charles Hitch, The Economics of Defense 1 n the Nuclear Age, pp. A5-j<6. 20

Eisenhower Administration had trouble devising any framework of strategic objectives. The fuzzy doctrines and lack of direc­ tion prevalent in the Eisenhower years meant that economic limits were the easiest criterion for deciding how much to spend on defense. v

However, whatever the argument in favor of budget ceilings, no administration ever willingly admitted to having used them.

One reason was that the arguments in favor of ceilings often referred to the inability of the Executive to control its de­ partments, and few people wanted to admit that. Even in the case of those arguments that did not degrade the administration, the personnel did not want it said of them that they considered finances more important than the nation's defense. This conflict of using ceilings while officially denying their existence was quite prevalent in the FY I960 budget.

No research could be found on the existance of a budgetary ceiling for I960, so the primary information in the Congressional hearings for that year had to be investigated. According to the general statements already made, it would be expected that official personnel would deny the existance of a ceiling while they, in fact, would enforce one. After investigation, this does seem to have been the case.

Secretary McElroy was asked about the subject on at least

*^Harry Howe Ransom, Can Ame r i can Democracy Survive the Cold War?, p. 1 I 6. 21 three separate occasions. In the first, he denied that there was a ceiling, but did give the services rough ideas on force levels and expenditures which he felt would meet the require­ ments of national defense. He furthermore stated that this figure was devised by adding a little to the FY 1959 expected expenditures.^® However, he again emphasized later that the

3 1 guidelines did not constitute a ceiling. The final statement seemed to sum up his position on the status of the guidelines.

Hr. Sikes. Were you gu'ided by Presidential or other White House directives in the amount of the fiscal year i960 budget, which was used by you in determining the overall amount of the current budget? Secretary McElroy, Mo. Hr. Sikes. Was the formulation of this budget determined in part by any other discussion with personnel outside the Department of Defense and if so, with whom? Secretary McElroy. As I testified earlier, this budget was not worked out on a fixed- dollar basis; it was worked out on the basis . of needed programs. There has been no re­ striction on me by the President except in terms that I felt were a prudent way of " looking out for the national security. As a member of the cabinet and the National Security Council the Secretary of Defense naturally has discussions with people out­ side the Department which affect his thinking on matters of national interest.32

Of course, the implication of all this testimony was that

McElroy decided without outside interference that certain general *3

30 De pa r tmen t o f Defense Appropriations for 1 960 , Part _l_, pp. 7^*75 .

1 Ibid. , p. 1^5

32lbid., p. 233. 22 levels of forces and expenditures best fit what he felt to be the requirements of military strength. If the figures reflected strength, it would be reasonable to expect that they would be flexible to meet reasonable changes in cost, and would be stated in reasonably general terms. The testimony of the others at the same hearings seriously challenges any such interpretation

Assistant Secretary of Defense McNeil spelled out exact figures in the Defense Secretary's guidelines. He claimed that

McElroy decided to give the figure of $M 3/^ billion to the services for dissemination. What is even more unusual is that that figure was derived by adding about a billion dollars to the FY 1959 figure, and not by consideration of strategic plans.

After discussions with the service Secretaries, this figure was dropped by $500 million to $41 1/4 billion.There was some confusion here because $41 3/4 was not a billion dollars more than any of the three basic categories, or any other categories that could be found, for the FY 1959 budget. However, the $500 million figure became too important later for the entire line of testimony to be dismissed.

McNeil mentioned that these figures were then dis­ tributed among the services, and the testimony of Maxwell Taylor of the Joint Chiefs of Staff also mentioned this distribution.

In his testimony, he mentioned receiving the figures from the

^Department of Defense Apo r oo r i a t 1 on s for I960 , Part II, p. 2. 23

Secretary of Defense and then distributing them to the comptrol­ lers and budget officers of the various services, the people responsible for drafting the original budget estimates.^

Of course, all this does not prove that the figure origi­ nally stated was not derived from strategic requirements. How­ ever, the argument becomes more difficult with the testimony of Army Secretary Brucker. He claimed that the guidelines given were equal to the FY 1959 expendi tu res plus nine-fortieths or

22 percent, which was the Army's proportional share of the $500 million increase in the budget.

Even the extra $500 million between $41 1/4 billion and

$41 3/4 billion was accounted for. McElroy allowed $500 million as add-ons to the budget after it has been formulated.^ What

McElroy did not count on was that his intentions were misinter­ preted and each service felt that they could submit $500 million in additional expenditures. Both the Army and the Navy asked for the full supplement while the Air Force offered to spend

$365 million in additional expenditures.

Of course, all this information is circumstantial, since the only man who could positively state the existance of a

Department of Defense Appropriations for i960, Part I, p. 343.

35lbid., p. 342.

36lbid., p. 343.

37|bid., pp. 80-82. 24 budgetary ceiling flatly denied it. However, this paper cannot accept that the costing of strategic needs would begin with the previous year’s budget and then would be figured in how many fortieths need to be added. Furthermore, no plan is going to admit that exactly $500 million will be needed for add-ons which were not included in the original budget because they were not needed or ready at that time. In addition, the status of the military plans now to be discussed lends little credence to the ability of anyone to use them to calculate the country’s needs.

In all, there are four strategic plans of possible rele­ vance to any evaluation of the country's needs. The first is the Joint Long-Range Strategic Estimate (JLRSE) which covers a time period of eight to twelve years in the future. Although

It has some influence on research and development decisions, it has no budgetary recommendations or precise predictions.

The second is the Joint Strategic Capabilities Plan which is an extremely short-range evaluation of strength. In effect, it Is a war plan and not a budgetary plan. The third plan is the Joint Strategic Objectives Plan (JSOP) which deals with a period of four to seven years. This is the first of two plans having a possible economic effect.

The first three plans are all devised by the Joint Chiefs of Staff. The fourth is the Basic National Security Policy

(BNSP) paper worked up by the National Security Council. This one served as the incentive for the Joint Chiefs of Staff to 25 formulate the JSOP.^®

Of all these plans, only two are designed to be of any possible use in budget formulation. These are the JSOP and the BNSP. However, all availiable evidence pointed immediately to serious problems in both plans as they existed in the formu­ lation of the FY I960 budget.

To begin, both plans were too vague for specific recommen­ dations. Particularly with the JSOP, which was devised by the people leading the budgetary squabbling among the services, the only possible way to draft any plan at all which would gain unanimous approval was to make it extremely general. Over the years, the plans were extremely consistent. However, they supported so many general programs in such platitudes that they were useless as budgetary guides. J In fact, it seemed that the only meaningful plan in terms of exact measures was the extremely short-range war plan, which had little at all to do itO with budgetary or program considerations. As if the criticism of outside observers was not enough, even Defense Secretary

McElroy claimed that it became unpredictable to try to plan more than three years in advance.'1* * However, it should be men-

^^Each of the plans is discussed in Harry Howe Ransom, Can Amer i can Democracy Survive the Cold War?, pp. 99*101.

33wi11 iam Kaufmann, The McNamara Strategy, pp. 22 S 24. L A suFrederick C. Mosher, Prog ram Budgeting: Theory and Practice (New York, 1954), pp. 50-51. 41 Department of De f ense App ropr i a t i ons for 1 960 , Part J_, p. 49. 26 tfoned for the sake of later arguments that, despite the Sec­ retary's pessimism, the Army maintained a five-year plan for replacement of obsolete equipment with a reasonable increment , U 2 z each year.

An additional disadvantage of the plans for budgetary purposes was that the planners and the budgeters never got together. Planning and programming, to the extent that they were done at all, were done by the military elements of the

Pentagon. The Joint Chiefs of Staff, in consultation with the military personnel, devised plans for military actions. On the other hand, the budgeting cycle was handled by the Secre­ tary of Defense and the civilian elements.Although military personnel were inevitably involved with the minute divisions of the budgets, as long as the budget figures came from above little coordination was possible.

However, the fact that the final splitting of the service budgets fell by default to military personnel meant that there was another block to budget planning. There was tremendous rivalry among the services, and the separate budgeting meant each service could attempt to develop major weapons systems on

Its own. As a result, there was a tremendous amount of dupli­ cated and wasted research. Also, services who could not keep

*2 I b i d . , p. 422.

^Arthur Smithies, The Budgetary Process in the Uni ted States , p. 240. 27 up often nursed obsolete systems.

Finally, the actual operation of the beginning stages of the budget cycle become clear. In effect, two things were going on at once. Beginning sometime near July, 1957, the Joint

Chiefs of Staff began constructing plans dealing in ridiculously broad terms with the needs of the country. As was the common practice, the Secretary of Defense did not become directly in­ volved in the formulation of the plans.At the same time, somebody was creating a formula which the Secretary of Defense presented in early 1953 with precise figures of what each ser­ vice was expected to present as a proposed budget.

The question of who derived this set of guidelines cannot be answered in this report. The Secretary of Defense was al­ ready quoted as saying that the President did not hand it down.

In the same hearings, McElroy also claimed that the. Bureau of 46 the Budget did not direct him on how much to ask. He was much more emphatic in his claim, supported by the Joint Chiefs of

Staff, that that body did not participate in any way. In fact,

McElroy claimed that the Joint Chiefs were not a budgeting agen­ cy and were used to overlook the budgeting process once it was started with nothing more than an advisory power.Maxwell

William Kaufmann, The McNamara Strategy, p. 170* *5lbi d., p. 31.

^Department of Defense Appronr1 ations for I960 , Part I, p . 1 2 1 .

Taylor’s testimony seemed to support this in that the JCS were

given two days to look over the draft of the budget before it was submitted to the Budget Bureau. In that time, they were

able only to write up a vague statement on the budget’s adequacy l g with no power of changing it. °

However, beyond the negligable role of the JCS before the

guidelines were given, little else can be said. If McElroy is

to be believed, every logical agency to assist in formulating

a ceiling was ruled out. With nothing more than the informal

influence of people around his office (quoted earlier), he

decided, without the use of an official plan, exactly what was

needed for the country’s defense, and exactly how much it would’

cost. That is rather untenable. However, since the ceilings

did not come from within the Pentagon, their exact origin is

outside the scope of this paper.

So far, the chronology has been carried as far as the mil­

itary plans being drawn up and the budget guidelines being issued

From this point, the actual budget requests must be drawn up and

sent through bureaucratic mazes for review and approval. McElroy

summed up this long phase in a nutshell by stating that every­

thing that is wanted is thrown in at the beginning, and that

the significant cutting takes place at the level of the service

Secretary and the Defense Secretary.^ As is the case with

2,8lbid. , p. 33 -

l‘9lbid., p. 76. / 29 most brief summaries, it is not entirely correct.

In order to follow the formulation process, the example of the Navy will be used as It operated for the FY 19(S0 budget.

Variances among the services will be noted'as their time arrives in the body of the review.

Within the Navy, the budgetary process began with a plan called the Navy Annual Program Objectives plan which was actually a list of what the Navy could purchase with the money it hoped to be able to receive. While there was some degree of strategic planning involved, the plan was designed to be used as a real budgetary tool. For this reason, each item in the plan had a price. The feeling of the Chief of Naval Operations was that, if the items were not figured by cost, the amount would be be­ yond practicality. However, it was expected to be above the previous year's budget so that it could contain some degree, of or ig i na1i ty.

It should be pointed out that the majority of the construc­ tion of this plan was little more than paperwork, involving little budgetary power. Wages, scheduled obsolescence, and operating costs constituted a tremendous portion of the budget and were figured simply by looking at the expenditures of the past. Even items being developed did not give a great oppor­ tunity for innovation. As recorded earlier, the average weapon system took seven years in research and development. As such,

^Except when noted, details are taken from Ibid. , pp. 66^- 66. Many of the interpretations are the author's own. 30 many of these were already well set in their rate of cost des­ pite their indefinite nature. However, that sma 11 part which was original and was innovative was first put into concrete terms at this point by minor people in the'budget advisory agencies of the various services, even though they were usually advocated by someone else.

Once the plan was completed, it was sent to the Chief of

Naval Operations so that he and his staff could review it.

Here, it underwent its first real trimming. However, the serious cuts were saved until later when more extensive review could be made.

From this point, it was sent to the Secretary of the Kavy for “approval." Conspicuously absent from this section was a'-y mention of review. Evidently, since nothing could be found to contradict it, the Secretary was literally confined to a general overview and approval of the plan at this phase.

At this point, the plan was distributed to the various bureaus and departments in the service, and the budget became a reality. Each agency, using the plan as a foundation, sub­ mitted estimates for their expenditures to the Comptroller of the service. The Comptroller held extensive hearings with members of the various agencies for justifications of their requests. The Comptroller cut nothing from the requests. How­ ever, he did make extensive recommendations to the Chief of

S^Arthur Smithies, The Budgetary Process in the United States, p p. 2 A 8-A 9. 31

Naval *Operations Budget Advisory Board (CAB),

At this point, there was a large difference between the

services on the powers of the Budget Advisory Agencies. The

Army Board held extensive hearings from the beginning of the

the budgetary process. By the time the budget actually reached

them, they were quite knowledgeable on the specific points and were able to wield a great amount of power in cutting the

budget. The Air Force Budget Advisory Agency was also rather

extensive, although far less than the Army. Meeting for a

little over two weeks, they were able to share power quite well with the Air Force Chief of Staff. The Navy Advisory Board was little more than a rubber stamp for the Chief.of Naval

Operations, who had already used his staff to help make most

important decisions. Although the source used was dated, in

the Navy Advisory Board met for only one day.^2

After this stage, the budget went to the Chief of Naval

Operations where recommendations were turned into actual budget

cuts. Again bureaus and agencies were called in to be informed

of their cuts and to be allowed to defend the cut programs. By

the end of the process, three to five billion dollars was cut

from the budget with the purpose of having the total exceed

the previous fiscal year's budget by only two to three billion

do 1 I ars.

Finally, in the stage mentioned earlier by McElroy, the

;>2lbid., p. 25 3 . 32 budget was submitted to the Secretary of the Navy. However, in direct contradiction to the earlier statement by McElroy,

Admiral Burke claimed that little was cut out at this stage, in fact, this was a stage in which the bureaus again tried to get their cuts restored. However, little restoring was done since there was a significant desire to keep the budget within the two to three billion dollar increase.

Before carrying the process any further, some additional statements should be made about the formulation to this point.

Despite the obvious importance of dollar level considerations in the total request, within the level there was considerable flexibility for the services. As will be shown to a considerable extent In the McNamara budget, civilian leaders could quite commonly cancel out or include new programs. However, their action was post facto and not nearly as inclusive as the original act of drawing up the entire budget. By sheer weight of numbers, if nothing else, the services were left with considerable flexibility in their new programs.

As a corollary to this, the strategic plans from which the budgets were built were also highly independent. In fact, they did not correspond with each other at all.^^ During this

53 •^William Kaufmann, The McNamara S t ragegy, p. 29 S^This was also aided by the willingness of outside com­ panies to do research for individual services. That willing­ ness in the RAND Corporation is shown in Bruce L. R. Smith, The RAND Corporation (Cambridge, 1966), p. 172 33 time the Army planned their equipment to meet a long war of attrition. The Air Force, on the other hand, planned for a short, nuclear war in which little stockpiling of equipment was necessary. As a result, the money for national defense was often spent for cross-purposes and spent incompletely for those.55

The chaos was shown most completely in the field of research and development. Due to the autonomy given each ser­ vice by the the ineffectiveness of coordination at the top, there was a possibility of any of the services carrying a project which they could most effectively develop. In reference back to the "Revolt of the Admirals" in 19^9, one of the crucial factors was that the Air Force was trying to take over some air­ craft duties which the Mavy had been handling. This type of situation led to a tremendous amount of competition and dupli­ cation among the services, which resulted in an extravagant waste of money.

One question which has not been answered, and which fits well into the section on research and development, is exactly where the ideas for the new weapon systems were created. The answer is varied. The TFX, or F-lll Tactical Fighter Aircraft, was first advocated during the Eisenhower years by F. F. Everest, *5

^William Kaufmann, The McNamara Strategy, p. 29.

56lbid., pp. 30-31. / 3Z| commander of the Tactical Air Command.Almost any person of significant position could initiate such an idea. The next step was to get a private company interested.

Private companies, many of them nonprofit, played an extremely important role in the development of any new weapons 5 3 system. Due to the sheer lack of funds, there was considerable hesitancy on the part of budget reviewers to allow a system with little more credence than a rough idea. To fill in the gap, industries that catered to the Defense industry often attempted to create and develop ideas on their own, and then sell their validity to the government budgetary personne1.^9

In effect, there was a trade-off. For a system to develop, whether conceived In a company or in the military services, someone from each segment had to take an interest.From

this point, it had to be sold as an idea to the military head of the service.

Towards the end of the Eisenhower Administration, the period

in question, research in the Pentagon was used or discarded vir­

tually at will by the service Chief of Staff.61 Through either

his own staff, as in the case of the Navy, or the Budget Advis­

ory Board of his service, he was able to effectively review

57ftobert J. Art, The TFX Decision, p. 15.

5®Bruce L. R. Smith, The RAND Corporation, p. 1.

^Robert J. Art, The TFX Decision, pp. 2^-25.

^Bruce L. R. Smith, The RAND Corporation, p. 165.

^Iwilliam Kaufmann, The McNamara Strategy, p. 292. 35 r and filter what stayed in or was taken out of the budget.

Therefore, to sum the development phase up in a nutshell, an idea was allowed to jell when a service agent and a private company agent were jointly interested. It could be fully devel­ oped and tested once the service chief became interested.

This brings the service budget to the point at which it was submitted to the Secretary of Defense. Referring back to

Admiral Burke, the budget had been clipped of an amount between three and five million dollars by himself. The service Secre­ tary had cut almost nothing. That point remains in dispute with McElroy's earlier statement that significant cuts were made by the service Secretary and the Defense Secretary until, it is seen what McElroy considered to be "significant." He stated that the phase of review by the Secretary of Defense 6 2 amounted to a cut of $300 million over all the services.

That seems hardly significant in light of the cuts imposed by the military on itself.

At this point, the budget left the Pentagon and headed for higher civilian authorities. However, before • fo11owing It out, some additional statements should be made about the power struc­ ture within the military sector.

There was a considerable amount of complaining throughout the literature that the Joint Chiefs of Staff were being left

Department of Defense Aporopriations for I960, Part I, p. 130. 36

\ out of the whole process. This paper cannot agree. It is true

that the JCS were given two days of review over the entire bud­ get, and were given little power of joint action. In effect,

this had severe repercussions on the unity and consistency of

the budget's capabilities. However, to state that this left

the Chiefs powerless is to confuse activity with power. General

Twining, Chairman of the Joint Chiefs of Staff, stated in the

hearings that his group worked harder with the service Secre- z taries on the budget than they ever had before. 3

However, their power came not from the service Secretaries

but from their own power of veto over the new and controversial

programs which constituted the only real flexibility in the

budget anyway. The Secretary of Defense could pick over the

formulated budget with his success dependent on the degree of

activity. However, the Joint Chiefs were in on the formative

stages where almost everything needed their attention to even make it into the original budget requests. Needless to say,

this form of analysis shall be applied again in the McNamara

budget.

The second point which must be attacked is the contention

that the service Secretaries had any significant budgetary power

at all. McElroy insisted that they were the first people to

significantly cut the budget requests. However, as the paper 6

63|bid., p. 78. 37 has progressed, McElroy's statements have had to be taken more and more cautiously. In all the research done for this thesis, the only evidence that could be found stating that the service

Secretaries had anything more than a rubber-stamp role in the process, or that they ever cut any money at all from the budget, was the general overview by McElroy. No doubt, it would be mis­ leading to completely leave them out of the process. Their testimony indicated a broad knowledge of their services. How­ ever, what seems to be a fair estimation is that they very clearly supported their own military branch, and that the bud­ get was cut about as much as they cared to cut it by the time it got to them. For this reason, the broad powers they possessed went largely unused. In fact, beginning under the next Defense

Secretary, Gates, there was an attempt to bring the service 6 Secretaries into a more meaningful role in the budgetary review.

Another point which should be mentioned, due to the a t te n- tion it received from Eisenhower, was the relationship between the military and industry. There can be little doubt that the cooperation between military personnel and defense-re1 ated

industries was incredible. The relationship in regards to the beginning of research has already been spelled out. Another point which received a great deal of attention was that 85? of all procurement contracts were allocated on a non-competitive

k^Pau1 Hammond, Organizing for Defense (Princeton, 1961), P. 297. 38 pricing basis.^5 |n effect, the implication was that there was a great amount of waste, graft, and corruption caused by a conspiracy among friends in these powerful positions. Blatant exposes of this type appear on the newsstands from time to time.^^ However, there was little concrete evidence, even in the well publicized cases, that there was actual graft or cor­ ruption. The men invo1ved seemed convinced that the way things were done was the best and the easiest. However, the element of waste was an entirely different story.

Once formulated, the budget found its way into the office of the Secretary of Defense. During this phase, in which the budget requests wereccut by $300 million, there were so many people around that the scene must have represented something like a party. All major officials in the civilian and military sectors gathered with the Secretary of Defense. McElroy was later asked how agreement was reached with stubborn military personnel on cutting pet programs. After some Rhetoric, he 6 8 stated that this problem was not met very much. That could have been because not very much was cut. However, the satis­

°5oepartment of Defense Appropriations for I960, Part VI, p. 460. ——— — ————------

^^Clark Hollenhoff has several mild exposes in print.

^7«'sc } ent i f i c Advisers: The Current System of Getting Advice Seems Awkward but Unavoidable," Science CXXXIV (December 1, 1961), P- 1739.

^Department of Defense Aopropriations for i960, Part I, p. 122. 39

faction of the military personnel with what was cut from the

budget will be discussed later.

Finally, with the budget formu1ated ■ for better or for

worse, the whole thing was submitted to the Bureau of the Budget

for furthur revision. This phase will not be covered in great

detail since the thesis concerns relations within the Depart­ ment of Defense. However, some of the points about this pro­

cess still involve relations within the Department of Defense.

The Navy submitted a budget of $13,875 million to the

Secretary of Defense, and the final budget request before 6 9 Congress was $11,370 million. The other services were not

asked how much they asked of the Secretary of Defense. However,

for the Navy alone, this was a cut of more than two and a half

billion dollars. To be fair, some of this cut came in the

Office of the Secretary of Defense. However, the entire cut

by the Defense Secretary was $300 million over all the services,

a negligable amount compared to the Bureau of the Budget.

Therefore, the points of significant cutting came in two places--

the service Chiefs and the Bureau of the Budget.

At this point, some observations should be made about the

budget finally submitted to Congress. Two specific features

should be given because of the role they played politically in

the McNamara budget. First, for the first time since the Korean

War, the force levels of the Army were not lowered in the FY

69lbid., p. 55A. 4o

I960 budget.?0 Second, within the Air Force, the B-70 bomber was proceeding quite satisfactorily through the research phases with adequate *funds.? Neither of these points was particularly

important at the time, although both became involved in budget­

ary pressures in the FY 1963 budget formulation.

Another point which gained some interest was the transfer

authority within the research and development field in the

Department of Defense. Specifically, the budget and the Reor­

ganization Act of 1958 authorized the Secretary of Defense to

allow the transfer of $150 million in research and development 72 fields where they would be needed more. - This was considered

necessary to keep up with new discoveries without the lengthy 73 process of reappropriation through Congress. However, as

will become important in the McNamara chapter, the money had to

stay within the research field. There was not a cushion to

pay for any unexpected costs in other fields, such as unexpected 74 wars .

Finally, something should be said about the form in which

the budget was organized. As stated earlier, the Congress in

?°lbid., p. 12.

71 Ibid., pp. 796-97.

?2 De pa r tmen t of Defense App rop ri a t i on s for I960 , Part VI , p. 33. ?3lbid. , p. 454.

?^De partment of Defense Appropriations for i960 , Part II, p. 64. 19^9 had ordered a more functionally oriented budget. Through­

out the years, the budget had come closer to that point. However

while there was an attempt to make the budget more functional,

the personnel in 1959 had no plans for radical changes in the

form itself.In fact, about the only change of budgetary

significance was in the Navy, where operation and maintenance

had been combined for the first time. This gave the Navy a

little more flexibility in how it was to spend its funds.

This is not to say that there was no support for a budget

on more functional lines. Maxwell Taylor, Army Chief of Staff,

very emphatically advocated changes in the format.However,

this issue was to be picked up with much more force by Robert

McNamara.

Finally, the budget was presented to Congress. A question

continually arose in the hearings, and deserves some mention

for thatreason. As was stated in the introduction, the Depart­ ment of Defense had a history of trouble with the services once

they came before the Congressional committees. For this reason,

the Bureau of the Budget reprotedly issued a statement to all

potential witnesses to confine their recommendations to the

75oepartment of Defense Aporooriations for I960, Part I, p. 128.

Pepartment of Defense Appropr i a t i ons for i960. Part I I, p. 3ZI.

^^Department of Defense Aporonriations for I960, Part I, pp. 336-37. 42

7 8 proposed budget as it was stated.' • This had strong possibil­

ities as far as budgetary control was concerned, in that one

source of appeal could have been cut off to the military.

However, a brief list of statements by military personnel

about their budgets should define the limit of control rather quickly. During the questioning, General Maxwell Taylor stated)

that he did not come to attack the budget, but that he did have

some reservations about It. For one thing, he felt the Army

should be composed of fifteen Instead of fourteen divisions.

Other Army witnesses claimed that sixty percent of the Army's equipment was dated in the Korean War or before, and that ninety o n percent of the maneuverability equipment was from that period.

All this equipment was thotrg-ht to i>e obsolete.

Admiral Burke, Chief of Naval Operations, complained that

eighty-one percent of all the Navy's ships were launched in or

before World War II. He contended that these were falling apart.

Admiral Burke also directly approached the question as to whether

any restrictions had been put on his speech. He claimed that,

not only had no attempt been made to silence him, but that he 8 7 would not think highly of anyone who tried. z

778 lbid.» pp. 78-79.

79lbid., p. 418.

8olbid., p. 136.

81 Ibid., p. 479.

821bid., pp. 582-83. 43

However, it might be contended that these were all general statements complaining in platitudes that neither attacked the

Administration nor demanded retribution. However, one of the

Air Force witnesses came close to such an attack when he com­ plained of undelivered wage increases for specific workers in a spec if1c base.

If this evidence is inconclusive, it is because the point I can be answered without a comprehensive study. The military personnel obviously were not restrained from general complaints since examples of them have been given. If they had seriously wanted to launch a severe attack on the foundations of the nation’s defense structure, it would have undoubtedly appeared at some other point in the budget formulation.

The final consideration in the budget came after it had

been approved and began to act as law. Two budgetary powers were exhibited at this point. Firstly, by law, the President

acting through the Secretary of Defense had the power of dis­

tributing the money. While he could not change its destination,

he could withhold any funds he wanted. This was done occasion­ ally, but seldom in cases of great contraversy. Truman did this

on the 70-wing Air Force voted by Congress in the controversy mentioned earlier. However, in FY 1959 the Secretary of Defense Q L cancelled funds appropriated for the Berlin Airlift. Neither

"•^Department of Defense Apn roo r i a t i on s for I960, Part IV. p. 228. R1 ^Department of Defense Appropriations for I960, Part I, p. 350. General Taylor, the Army Chief of Staff, nor Secretary Brucker of the Army were consulted about this. However, neither com­ plained.

The other power rested with the services, and that was the power not to spend. Specifically, the reason funds were not spent was that they were often appropriated for projects which went many years in development. In fact, the figure was considerable since most of the new money was appropriated for projects in the development or research stages. In the fiscal year 1959, the defense budget was increased $1.3 billion by Congress. Of this, $700 million was not spent in that year. D

However, although this practice influenced the amount of money spent in any one year, it was not a real budgetary power. The services wanted the money to spend. If they cut their expenses, it did not affect the Secretary one way or the other. At least, that is the speculation about such a move. No instance could be found where any service decided just not to spend its money.

Therefore, the compilation of the budget was complete.

In summary, several points were important for later years. There existed a constant state of distrust between military and civ­ ilian personnel in the Pentagon, leading to a lack of cooper-

85lbid., p. 215. 45 atton between the two. Within the budget process, plans were drawn up at the beginning of the process while, at the same

time, the Secretary was deriving a budget ceiling for the year.

Deriving the original budget-requests was a third process com­

pleted by low budget officials in answer to expectations from officials throughout the military bureaucracy. From this point,

the Military made most of the changes with the Secretary's

role being sporatic and minimal.

In summary, this is the analysis of the power of one man

for comparison with another in the next two chapters. Secre­

tary McElroy was an intelligent man who caught on to things in

the department quickly.He was a businessman who knew a great amount about financial administration. The problem was that he did not know much about military matters. He was caught in a maze where a bureaucracy was functioning without him, and he

had to interfere to gain any power at all.

To do so, he relied on the people around him. However, one thing he did not do that McNamara did was to bring his own

friends for his staff. The people he trusted were so involved

in the decisions that they could not be fair or entirely hon­ est.Fighting an overwhelming bureaucracy with a limited

amount of information, McElroy became a man lost in the Peter

Principa 1--incapab1e of handling his job, but not incompetent

OoC. W. Borklund, Men of the Pentagon, pp. 174-75.

87|bid., p. 182. enough to be kicked out.

/ CHAPTER I I I

MCNAMARA'S PLAN

In a paper of this type, it would seem obvious that McNamara's objectives would easily fit in the outline. However, there is a real problem of organization in fitting in both what McNamara planned to do and what he actually did. The reason is that an analysis of McMamara's success can only be handled easily in a chronological order within the development of a budget while his plans for changes were not chronological at all.

To fully explain the problem it becomes necessary to state what the intended changes were, and that requires some pre­

liminary statements. Jo beain. this chapter concerns the changes

McNamara intended to implement upon his entrance to office while the next chapter deals with how effectively the changes were put.into effect^ This meets with a very serious problem of division. President Kennedy became famous for the statement that one of his greatest surprises on entering office was that

things were as bad as he said they had been. The impact of office had an equally strong influence on McNamara. Many of the specific cha"hges associated with his general purposes were not spelled out until he was in office. In some cases, the specifics were

little more than belated parts of his plans. However, in some

cases they seemed to be real political reactions to the power

structure he saw around him. ^^e way this paper intends to organize the presentation is to give in this chapter only those A8 plans specifically given before McMamara's inauguration.') Other plans will be saved until the part in Chapter IV in which they fit. in chronological order. As with everything, there are a couple of exceptions. However, these will be defended individ­ ually as they show up In the paper.

T^e second observation, somewhat related to the first, is that the literature in the field of PPBS has been extremely fluid, leading to the difficulty of pinpointing one precise system as McNamara's own. The historical development of the various parts of the PPBS system shall be covered as they arrive in the report, and some examples of the fluid base of the whole system can be given at this time. In a I966 symposium on program budgeting, there was a claim that there were three major aspects of program budge11 ng--the structural aspects of the program categories, the analytical process used for evaluation, and the • 1 n p administrative-organizational facilities for implementation1.

However, one year later, David Novick, one of the original names related to program budgeting, agreed with the structural and analytical aspects while claiming that the third important factor 89 was the informational system which supplied the decision makers.

The specific disagreement does not prove a great point.

U Q °Werner Z. Hirsch, "Toward Federal Program Budgeting," Public Administration Review, pp. 260-62.

^^Melven Anshen, "The Federal Budget as an Instrument for Management and Analysis," in David Novick, Program Budge t ing (Cambridge, 1967), p. 6. A9

However, what It does I nd Ica te is that program budgeting, at

least at the time it was being implemented, rested on the shaky

basis in which there were no common assumptions among the

scholars. In effect, each person started with his own assump­

tions and built his own system. As such, there was consider­

able variety in programming theory, depending on who one con­

sulted.

However, some general history can be given of programming

as a whole, and how it evolved towards McNamara's particular

plan. The concept of programming in budgeting can easily be

traced back to the Second World War where David Novick was

involved in coordinating procurement for construction of sever-

al types of weapons at the same time. In 19^9» the Hoover

Commission studying budgeting for the government coined the

phrase "performance budget" to refer to the budget form in which

broad functions were given. This general type of budget was

used until McNamara initiated changes in the FY 1963 budget.

At the same time, the task force related with the Hoover Com­

mission coined the phrase "program budget" to refer to the bud­

get form in which actual defense objectives were listed with q i- expenditures.-^ One additional difference was that the perfor­

mance budget was primarily management oriented while the program

90 Werner Hirsch, Fub1 Ic Administration Review, p. 259- 9 1 Allen Schick, Public Admi n i s t ra t i on Review, p. 250. 50 budget was planning oriented.This meant that the performance budget revealed inefficiencies in individual offices while the planning budget emphasized" inefficiencies in fulfilling planned defense objectives.

This leads to a form of analysis which shall be used to analyze the success as well as the purpose of the McNamara budget. The structure of the analysis is not new, although

it is being used for purposes which the creator might well cringe about.The theory claims that each budget process

is a combination of three factors--the planning function, the management control function, and the operational control function.

According to the original article, any budget could be analyzed for its primary objective by finding the balance between these three functions. The first historical phase, lasting for about fifteen years after the formulation of the original executive budget in 1921, was operationally oriented. The primary pur­ pose of the Congressional action was to initiate efficiency

in the Federal bureaucracy. The second phase, lasting from the

New Deal to the late 19^05,* was primarily management oriented.

The division of the budget, particularly the defense budget as described described in the second chapter, listed expenditures by agency. in this structure, it emphasized inefficiency within

the individual agencies as revealed in the level of their expen-

92|bid., p. 252. ♦ 93lbid., pp. 224-25. 51 ditures. The final stage was begun In 19^9, although it did not truly develop until the McNamara budgets. This budget was planning oriented, and emphasized expenditures on goals, regard­

less of the agencies in which the expenditures were allocated.

Mr. Schick, who created this three-phased distinction, never took the point any further. However, there was a consol­

idating function in the growth of the three phases. Each phase was concerned with efficiency achieving goals. However, the goals spread from individual tasks to agency-wide tasks to defense-wide tasks. Not until the third phase, therefore, was budgeting made on the same considerations as planning. This means that the final phase began with defining the goals to be

achieved by the defense establishment and then finding the most efficient ways to achieve them. McNamara was concerned with

exactly this order of events when he stated: > Yet my instructions from both President Kennedy and President Johnson were simple: to determine and provide what we needed to safeguard our security without arbitrary budget limits, but to do so as economically as poss i b 1 e.

Therefore, /^cNamara had set up a double goal of two inter­

related parts. In order to succeed, he had to first determine

and maintain an adequate defense. Secondly, he had to find and

implement the most efficient way to achieve the goals. To fail

at either task would have made McNamara at least a partial fail-

Robert S. McNamara, The Essence of Security (New York, 1968), p. 8?. 52 ure^ However, it should also be noted (since it will become important) that the purpose of the whole move into the third historical phase was to include the increased consolidation.

In addition, it was the part of the process which was used as a base for efficiency. Therefore, it was more important to achieve the defense goals than the efficiency. Efficiency without the goals would be nothing more than the second histor- i caI phase.

i t h these objectives in mind, it becomes possible to move into the measures which McNamara intended to take to accomplish his objectives. The development of the McNamara program was a perfect.case in the study of the delegation of authority and power. To a large extent, credit went to the top officials while the detailed work came from the lower officials. Presi- ent Kennedy in his role as President took responsibility for the success of the whole operation.. However, to an extent never seen before. President Kennedy allowed virtually a free hand to McNamara in implementing a program.^5 jhe delegation involved policy-making power as well as bureaucratic inertia because

Kennedy felt safe In trusting McNamara who seemed to think so much like him.^^ This lends credibility to the study of budgets from the perspective of the Secretary of Defense.

However, McNamara also delegated responsibility in much the

95wi11 iam Kaufmann, The McNamara Strategy, p. IX (Foreward). 96 5 Ibid., p. 300. 53 same way. Specifically, cNamara hired as the Assistant Secre­ tary of Defense (Comptro1■ar) Charles Hitch, who for all pract- ica1.purposes engineered the McNamara form of PPBSy ' While at the RAND Corporation, Hitch coauthored a book designed to study the military with a hope towards change along several lines. The book was entitled The Economics of Defense in the

Nuclear Age. McNamara was quite impressed with the book, and adopted many parts to specific changes which he had in minc'x^®

Therefore, this paper will treat the book which came out of the RAND Corporation as something close to a primary source.

Some caution will be used since some of the details were changed by McNamara. To give an example, the suggested programming categories in the book do not at all match the categories finally devised for the military budget. However, Hitch used his position with all the permission of McNamara to gain considerable power over how the budget would be•changed.

The question then remains of why the changes should be studied from the point of view of McNamara and not Hitch. The contention of this paper is that, while Kennedy allowed power

y7lbid., P. 173.

^^Charles Murphy, "The Education of a Defense Secretary,” Fortune.LXV (May, 1962), p. 273. 9 9 ^•'Charles Hitch, The Econom i cs of Defense i n the Nuclear Age, p. 56.

^OOnThe Revolution in the Pentagon: McNamara's Way," Newsweek LIX (March 12, 1962), p. 23. 5zi and freedom to filter to McNamara, McNamara managed to keep the power by his close scrutiny of the activity of his subordinates.

Whether the contention is justified will be answered in the conclusions on how powerful McNamara was.

Returning to the central purpose of the chapter, Charles

Hitch gave four specific recommendations for change in his book.

He argued:

1. By far the most important reform is the recasting of budgets and accounts to reveal the costs of meaningful end-product missions or program..., rather than the costs of classes of objects.... 2. Quick budget estimating procedures must be developed. The present two-year budget cycle is completely inconsistent with the require­ ments of quantitative economic analysis.... 3. Efficient choice of prog rams... depends on total program costs over a period of years, not on expenditures in some particular bud­ get yea r .j. . . 4. Carrying out economic improvements--invest- ments that would cut total, though not immed- • iate, costs of achieving desired capabilities-- might be encouraged by a form of "capital budget."1 segregating certain investments from operating expenditures.’®^

Through considerable editing, this was finally reduced to a political program of planning, programming, and budgeting.

The planning part of the program exemplified the type of changes that McNamara tried to enact. Planning had been done all along. However, McNamara attempted to reform both the form and process of planning. There has already been consider- / ■ •

l01Char1 es Hitch, The Economics of Defense I n the Nuclear Age, pp. 233-34. 55 able discussion on the nature of the planning In the FY I960 budget. McNamara found two faults with this process which he felt needed to be corrected.

firstly, as already noted, planning was completely separated from budgeting due to the broad nature of the budget.

This meant that efficiency often prevaled over strategic object­ ives simply because those objectives were not defined in concrete monetary terms. However, this occurred at a time when the move­ ment was towards consolidation of overall objectives. Indeed, at the time of McNamara's entrance to office, Washington circles were discussing the Symington Report, which advocated widespread । n 7 consolidation of the structure of the Pentagon.

McNamara and Hitch hopped on this bandwagon from a slightly different approach. McNamara claimed that planning and budget­ ing were synonymous since they combined to state how much was needed for the tasks that had to be accomplished.^0^ In addition

Hitch explained that the level of expenditures was dependent on the benefits of other possible purchases with the same money.

The reason, to delve into elementary economics, was due to the law of diminishing marginal returns. Defense was only one of the categories of government expenditures. In order to deter­ mine how much should be spent and how it should be allocated,

*°2jackRaymond, "Mr. McNamara Remodels the Pentagon," Reporter XXVI (January 18, 1962), p. 31. - ———— J • 103* . . ^William Kaufmann, The McNamara Strategy, p. 169. IG^Charles Hitch, The Economics of Defense in the Nuclear Age, p. 3. 56

it was necessary to determine the cost and compare it with the

benefit;.' This will be covered more in the third phase of the

plan, which unfortunately for this presentation was interrelated

However, each increment yielded a smaller and smaller cost/

benefit until it either was not worth the cost, or was less

beneficial than other possible purchases. This relationship

could not be shown if the planning and budgeting phases were

separated as they were in the pre-McNamara budgets.

VT'-'-e second problem resulted from the degree of planning

which was inherent in the budgeting cycle as It existed. Specif

ically, whether the budgeters planned it or not, they were

stating the strategic plan of procurement for the next fiscal

year. This placed all the planning emphasis on a one year

basis.However, as has been mentioned earlier, most weapon

systems took several years to develop. The services finally

found a way to take advantage of the situation. They would

program as many new systems as possible with small initial expen

ditures so that the true costs would not be revealed to Congress

until there was already a significant Investment in time and money.Both Hitch and McNamara criticized this system

strongly, in that one year was too short of a time for a mean-

1 ^-,Da v i d Novick , "The Department of Defense," in David Novick, Program Budgeting, pp. 85-36. 1 06 Ibid 57

i ng fuI p1 an

in order to solve these difficulties,McNamara offered a new concept in defense planning.' The BNSP, the JSOP, and the

service plans were still to exist. However, their information was to be merged into a new Secretary's plan which was open

to review by all relevant agencies. he plan was to consist of an eight-year force structure plan and a five-year financial 10 8 program of major forces, dollar costs, and manpower. In

this way, costs would be predicted in dollar terms far enough

into the future so that it would be extremely difficult to hide

future costs. At the same time, it would provide a meaningful substitute for budgetary ceilings in deciding how much could be spent on defense/

Of course, there had to be considerable flexibility at the

far end of the plan. It was hoped that the most recent year in

the plan could simply be converted into the year's budget as it arose. When one year was chopped off in this fashion, another could be added at the far end of the plan. It was realized that

the budget for the fifth year would be unrealistic in terms of dollar value. However, this was not extremely important since,

in that amount of time, substitution could easily take place.

•^Katherine Johnsen, "New Budgeting Plan Shifts Rivalry From Services to Weapon Systems," Aviation Week and Space Tech- nology LXXV (July 31, 1961), p. 2k.

Id^Qavid Novick, Program Budgeting, p. 9;f.

Ing ^Charles Hitch, The Economics of Defense in the Nuclear Age, p. 25. 58

What was important was that there was some rough Indicator of how much various systems would cost before they were ever init­ iated.

'nether important objective of this plan was to base expend­ itures on strategic needs rather than artificially derived budget ceilings. There was considerable argument at the time that the economy could stand much more spending for defense if it was needed without any significant effects.’^® Of course, there was considerable disagreement in that the opposite view had been in control for years. However, what was important was that the people entering office believed that ceilings could be ignored since the economy could absorb any sudden shifts.^**

This allowed a bueget .'evelopcd from a strategic plan and from economic comparison with other possible programs.

As long as the budget had been formed internally among the services, no method of spelling out costs for defense-wide objectives had been essential for the formulation of the budget.-

Of course, it had caused the strategic problems already mentionei, but budgets were not formulated on this level. However, the services had found a method for choice for their own internal decisions. For years, a program type of budget had been set up.^

* * ^Ha r ry Howe Ransom, Can American Democracy Survive the Cold War?, pp. 128-29. * CnarIes Hitch, The Economics of Defense in the Nuclear Age, p. I 12 Aaron Wi1 davsky, The Politics of the Budgeta ry Process (Boston, 195^), p. 139. 59 in this procedure, each expenditure was listed by function, and this allowed comparison of Items of similar functions for eff i c iency.

However, the cumulative budget had no such characteristics, and this made meaningful budget decisions on this level diffi­ cult. The problem was that, with defense-wide goals being different from the categories listed in the budget, the budget was not useful for comparing alternative ways of accomplishing 113 the same goal. J There had been a more functional switch in

19^9 from expenditures by agencies within the services to broad functions within the services. As already mentioned, this was of great benefit to the Individual services in budget formula­ tion. However, it was not adequate for defense-wide figures ‘ 1 1 4 since it did not meet their objectives. All this led Gener­ al Maxwell Taylor, Army Chief of Staff, to state in i960 that

“I doubt personally that anyone knows exactly what we are buying with our budget.

'hat McNamara and Hitch decided to do was to require the budge,, to be formulated under new categories which would be more meaningful for defense objectives. Instead of object expend­ itures like "Personnel", "Military Construction", etc., the

1 1* ^char1 es Hitch, The Economics of Defense in the Nuclear Age, p. 54 . 1 1 . c o Ibid., p. 5 2.

’ ^Har ry .Howe Ransom, Can American Democracy Survive the Cold V/ar?, pp. 86-87. 60 following nine divisions were devised.

1. Strategic Retaliatory 5. Reserve and Guard Forces 6. Research and Devel­ 2. Continental Defense opment Forces 7. General Support 3. General Purpose Forces 8. Ret ired Pay A. Airlift and Sealift 9. Military Assistance ®

These were then to be broken down into the weapons systems necessary to accomplish their tasks.

One additional split within this budget was within the category of Research and Development, which had survived from the category of Research, Development, Test, and Evaluation of the previous budgets. Each new proposed weapon system was expected to be analyzed in terms of three types of costs. First, there was the traditional Reasearch and Development cost, which eventually was broken down into a program definition phase where the advantages and disadvantages of the system could be reviewed; and a development phase where the weapon could be developed for full testing. Second, some notion of operating expense was to be required. Third, the Secretary of Defense planned to require some estimation of the investment required u . 117 to get the system operating.

At the time that the new programming system was proposed, there was considerable doubt as to its intention and probable

'^CharlesHitch, Decision-Making for Defense-(Berke1ey, 1967), P. 3h. ^J^Katherine Johnsen, Aviation Week and Space Technology, p. 2k. ' 61 result. This was something entirely unknown on this level, and many people speculated that it was an attempt to reorganize 118 the services along functional lines. However, this does not seem to have been the case, and McNamara later claimed that he saw it as the best way to unify defense functions without 119 any structural merging.

As far as probable results, only broad speculation from limited experience could be made. One of the more respected analysts stated the theorejtical differences in this way:

This brief account will focus on three major consequences resulting from the differ­ ences in budgetary procedure. First, the tra­ ditional procedure increases agreement among the participants whereas the program device decreases it. Second, the program budget­ ing procedure increases the burden of cal­ culation on the participants; the traditional method decreases it. And, third, the spec­ ific outcomes in the form of decisions are likely to be different.^0

Whether this proved to be true will be analyzed in some detail in the next chapter.

^he third interrelated part of the PPBS was the budgeting phase. To this point in McNamara’s program, there was a plan to decide what functions were needed for national defense and a set of categories to break these needs down individually so

1l8lbid.

l3(;* eorge c. Wilson, Aviation Week and Space Technology, p. 28. 1 20 Aaron Wildavsky, The Pol i t i cs of the Budgeta ry Process, p. 136. 62 that weapons systerns’cou1d be found to fulfill them. All that was necessary now was a method for choosing which weapons were needed. It should be recalled that the subordinate goal of

McNamara on entering office was to provide the defense with as much efficiency and saving as possible. McNamara found tradi­ tional methods of weapons choices and source procurement to be totally inadequate.

McElroy introduced in the FY I960 hearings his philosophy of choice as recorded in the second chapter. 'He felt that the necessary systems should be included first and then additional systems could be included by what they contributed until the monetary limit was spent. This system had vague connotations of efficiency. However, it also had several problems in efficiency.

to begin, it assumed that certain weapons systems were essential regardless of their costs. It never compared these against any alternative methods of accomplishing the same tasks.

Second, it was such a loosely worded doctrine that it indicated no guidelines for choosing when there was not a clear choice.

Third, it had little relation (beyond the "necessary" weapons) between usefullness of the alternate systems and the role the service played in the total defense. Duplication, and even competition, were rampant. Fourth, it did not stress monetary accuracy to the extent that McNamara wante !

The fourth problem deserves special artentioa. In the haphazard system in which the extra weapons were slapped onto 6 3

the budget, it was greatly to the advantage of weapon proponents to minimize the expected costs for development and operation.

In fact, the costs estimates were so out of line that any de­ tailed method of cost comparison would have been senseless.

It was found that, in major weapons systems, the final cost of research and development averaged 320% of the original esti­ mates. In more simple terms, cost overruns we re more than twice as much as the estimated cost of the whole project in the . . . 121 beg inning.

11 this led to a search for a scientific method to intro­ duce the maximum possible efficiency in the Department. To do so required that the alternatives be properly defined and that

the correct choice be made. The search finally revealed a dual system of selection--systerns analysis, and cost/effeetiveness.

Attempts at scientific measures of efficiency started during Vorld Mar II with Operations Research, the direct prede­ cessor to ^*cost/effectivenessV^ V/ith the simultaneous con­ struction of several types of weapons, each requiring different parts at different phases of construction, some system was necessary for procuring the correct parts at the correct time without the inefficiencies of storage and overproduction of certain parts. This was greatly complicated by the need to time

the strained production facilities so that the right articles

------—------Robert J. Art, The TFX Decision, p. 86. 12 2 Werner Hirsch, Public Administration Review, p. 259. 6 4 would be produced in correct quantities at the right time.

All this was accomplished with reasonable success through complex mathematical computation.

From operations research, systems analysis and cost/effec- 123 tiveness have evolved. The terms are rather confused in common literature, and are often interchanged. However, to ■ give the major differences as commonly given, operations research is a system of coordination of production which has little interest in future plans while systems analysis is a comparison of costs and benefits of various possible weapons systems with no pre-determined preference of weapons or goals to be accom­ plished by them while cost/effectiveness is a comparison of- costs and benefits of various possible weapons systems to accomplish a predetermined goal, but with no preference of 1 24 weapons chosen. That is an extremely complex statement, and a chart would probably make the distinction more clear.

SYSTEM ARE WEAPONS TO BE ARE GOALS USED PREDETERMINED? PREDETERMINED? Operations Research Yes Yes Systems Analysis No No Cost/Effectlveness No Yes Pre-McNamara system Most1y Limited

Even under this definition, which makes a very clear dis­ tinction between systems analysis and cost/effcctiveness , the two were used intertwinI ng 1y In practice, and it was often

^^Aaron Wildavsky, Public Administration Review, p. 298.

124 * Charles Hitch, The Economi cs of Defense in the Nuclear Age, p. 41. difficult to tell which was being used in individual cases.

At this point, the analytical structure and process of cost/effectiveness will be given so that observations can be made about its usefullness and requirement for accuracy.

Economically, the whole system is based upon the two 1 av/s of diminishing marginal returns and diminishing marginal uti 1 *' v.

What these laws state is that each increasing dollar spent on any one good will yield a decreasing amount of the product while each increasing unit of any one product will yield a de­ creasing rate of usefullness to the consumer. For the purpose of explanation, these shall be placed into a chart. In ord^r to place them into a chart, usefullness shall be measured in dollars. That is-moV a "peTfc^tly correct measure since mon."/ has a flexible value itself and, according to the Malthusian explanation, has diminishing marginal utility beyond a certain point itself. However, for this limited purpose, one can measure utility by the amount of goods that could be bought by varying levels of money.

Quantity 66

Hoving across the bottom line, one can find the cost and usefulness of the last item of this type bought. To find the cost/effectiveness of any purchase, one-can divide the cost into the effectiveness. As long as the quantity is to the left of quantity X, the result will be between zero and one. Beyond the quantity X, except at extreme quantities, the result would be greater than one. Purchases in this range are never bene­ ficial, regardless of alternative goods which could be purchased.

The way to determine how to spend available money is to spend it on the good with the lowest positive cost/effectiveness rating. It should be noted that cost/effectiveness changes after each purchase since marginal cost and utility have changed.

V/hat this whole process is aimed at doing is getting 11 the most for your money" through the most efficient distribution of •125 purchases. However, there are a number of specific problems which had to be overcome to make this system workable.

Firstly, the system required that alternatives be spelled out in terms of cost and benefits. In order to do this, McNamara 12 6 planned to have alternatives costed out in advance. Secondly, the existence of these alternatives complicated the decision from sheer weight. it required more analysis and time, even *1

123 Aaron Wi idavsky. Public Administration P. e v i e w, p' 293. 1 o * Robert J. Art, The TFX Decision, pp. 31-32. 67 though the decisions were far more knowledgeable once made. "■

Finally, the system rested on the unfounded assumption that benefit could be measured.' Apart from the difficulty of valuing something which was most useful if never used, there was the problem that the benefit was often value orient? . The problem from the p re-fl cNama r a days was that people often believed in a system which could not be tested except in time of war. This same belief was often the only possible measure of benefit under the more scientific method of cost/effeet 1veness.

se were the three methods of procedure which McNamara wished to follow upon entering office. Of course, he did not consider the methods to be ends within themselves. They were methods to -derive the two -goal S which he had set up. However, he w.is not modest enough nor politically stupid enough to have entered the office without some conclusions already announced.

Kennedy, from-the period of 195u to I960, had three particular campaign issues. He was perhaps most well remembered for his claim of the existence of a missile gap. In addition, he was skeptical about the contribution tactical nuclear weapons could make. Finally, he wanted to strengthen the conventional forces to handle the bulk of the national defense.’^9 This was finally reduced to two specific instructions to McNamara upon his entrance

* ■‘‘^Wi I 1 i am Kaufmann, The Pc flam a ra Strategy, p . 251.

128' . . . e Aaron Wildavsky, —Public——— —Administration———————- —Review,—— p. 297. ^9\vil|icnm Kaufmann, The McNamara Strategy, p. k k. 68 to office--to harden the nuclear deterrence against a first- strike, and to increase the conventional forces.'^® In answer to the last point, McNamara Immediately ordered the Air Force and the Army to increase the limited war capabi1ities.once he i ■> i" ente red of f i ce.

Ihese were the plans that McNamara brought to office with hi.r. They were conceived in the hope of supplying deterrence at the least feasible price.In order to do so, a number of minor advantages were introduced to aid in accomplishing the original tasks. Some of these included independence for the

Secretary of Defense from the service budgets, involvement for the Secretary in the Pentagon's substantive isssues, more useful budget categories,, and better financial management through budgeting and the five-year plan.‘JJ

However, the boldness of the plans also indicated the difficult task ahead in trying to implement them. The next chapter tries to analyze the results of that confrontation.

j. v. Murphy, Fortune, p. 268. ^*Larry Booda, "McNamara Pushing USAF-Army Rivalry," Aviation Week and Space Technology LXXVIII (January 1A, 1963)» p. 27- 1 T 2 -* "McNamara in Control: A Firm Hand at the Pentagon," U.S. News and World Report LI (October 2, 1961), p. 67. ^^Keith Clark and Laurence Legere, The President and the Management of National Se cu r ity (New York, 1969), pp . 18 7-8T^ CHAPTER IV

THE MCNAMARA BUDGET

v.'hen McNamara became Secretary of Defense In early 1561, he entered an extremely awkward position. Previous Secretaries had been in an awkward position also, since they were made politically superior to military personnel with considerably 1 34 more experience. However; McNamara brought in plans of reorganization which flatly assumed that he knew more about how to run military matters than the military men themselves. Only one other man had entered the office with these high hopes, and after his repeated failures, he concluded that this office would be one of Washington's biggest graveyards for cats.^35

In addition, McNamara had an additional reason to be wary of his office. His bright new goals would not institute them­ selves. .In effect, the success of Planning, Programming, and

Budget Systems would be largely dependent on the quality of the man who tried to force them through. ^6 w| ] । j,e concluded

later, it was probably impossible for anyone to have completely

instituted PPBS at that time. However, if the person was not strong enough to gain political control of the Pentagon, it

Stewart A1 sop, "Master of the Pentagon," Saturday Evening Post CCXXXIV (August 5, 1961), p. 45.

jack Raymond, Reporter, p. 31.

' ^Arthur Smithies, "Conceptual Framework for the Program Budget," Program Budgeting, p. 60. 70 could not have been instituted at all.

One thing which soon became obvious was that McNamara rapidly became the dominant force in the Pentagon. Under his administration, the organizational chart of the Department of

Defense soon lost all significance '

However, McNamara did not act alone. As mentioned at the end of the second chapter, McElroy was forced to rely on advice from advisors who were not friendly to his cause, McNamara decided to bypass this by putting in people he could trust without having to enlarge the bureaucracy with new offices.^*

The selections he made immediately began to attract attention since they were some of the more controversial and active prospects for the Jobs. '''' McNamara's personal claim at the time was that he was trying to find people to work for him u-ho were smarter than he was.

The people he found fell into two groups. First, he found a number of people who had been old hands around Washington and the Pentagon. The most well known of these was Deputy Secretary

Roswell Gilpatric, who had been a former Under Secretary of the

Air Force. Also included in this group were the Air Force

W. Borklund, The Depar tmen t o f Defense , pp. 277*78 . 11 o 3 Adam Yarmolinsky, "How the Pentagon Works," Atlantic, p. 59.

1 39 Ford Eastman, "Broader Planning Role Seen for Defense,11* . Aviation Week and Space Technology LXXIV (January 2, 1961), p. 18. I L Q Stewart Alsop, Saturday Evening Post, p. 45. 71

Secretary Eugene Zuckert and the Navy Secretary John Connally.

Assistant Secretary of Defense Paul Nitze also fell into this group from his experience, a 1 though he served as the “dean" of the second group.

Ilhe second group was something of a new experiment in the Department of Defense. They consisted of defense intellect­ uals, who had worked for the Department through such organizations as RAND, although they had never had political positions/ By far the most famous and influential of these was the Assistant

Secretary (Comptroller) Charles J. Hitch, who has already been mentioned several times. Another extremely important selection was Dr. Harold Brown, an extremely respected physicist who became Research and Engineering Director working under Paul

Nitze. Also included in this group were Alain Entoven, Henry 141 Rowen, William Bundy, and Adam Yarmolinsky. This group became known as the “whiz kids" due to their intellectual background which was virtually unknown in the Pentagon. However, McNamara felt that this background was needed to apply PPBS, and partic­ ularly cost/effectiveness within the Pentagon on non-military ■ 142- matters.

In addition, McNamara, broke new ground by hiring Arthur

Sylvester as a Press Secretary. In Washington.circles,.thts practice had been interpreted as indicating that the officer did

•‘"ibid. • ——— — ^^William Kaufmann, The HcNamara Strategy, pp. 292-93- 72

1 k 3 not trust either the interviewers of himself. However,

McNamara did not seem rattled by gossip, and continued to use techniques regardless of their social consequences.

Of course, all of these people could not be equally impor­ tant. There were two who became identified with particular revolutions within Pentagon practices. As already mentioned.

Hitch became identified with the budgetary changes within the

Pentagon. For that reason, he has received and will receive extensive attention in this paper. Harold Brown, from his position in Research and Engineering, soon took over control of the transformation of the weapons systems and the methods of evaluating them.

However, despite all the magnificent aid which he received, by far the most important man in the picture was McNamara him­ self. He seemed to be the first Secretary of Defense in history 1 5 not to be baffled by the job. The full significance of this was explained recently in a semi-serious book on the role of executives called The Peter Principal. Using only the parts of

the principal that apply. Dr. Peter differencia ted between those who have and have not reached their levels of incompetance by whether they understood the purposes of their actions and could change them to meet changing circumstances or merely understood

1 if 3 ^Stewart Alsop, Saturday Evening Post, p. A6. J "The Revolution in the Pentagon: McNamara's Way," Newsweek, p. 28.

J . W. M'urphy, Fortune, p . 103. 73 their procedural duties v/ithout being able to sit dovn and analyze their purposes. Therefore, while there can he a thin thread between the ability to comprehend the job as a whole with its purposes and the breaking point where the duties become too complex to comprehend, they can make the tremendous difference of being able to understand what is wrong and take control of the bureaucracy.'^ McNamara seemed to be the first

Secretary to understand his job with its military complexities well enough to challenge his subordinates1 actions. In fact,

McNamara seemed to value his own military judgments more than । Zj -I those of the military.

In order to keep up with this tremendous task, McNamara immediately ordered that a safe be placed in his huge office Hi 8 so That he could keep classified papers close at hand. Using this as his tool, McNamara then proceeded to bury himself in minute, detai1s and reports which the services used to make bud- 1 << 9 getary decisions on the lowest level. In effect, he took over a review process of the services by using the same data to arrive at his own decisions; V.

146 The entire book Involves the development of the theory, and no page number will be given. Laurence Peter and Raymond Hull, The Peter Principal (New York, 1969). 147. Vincent Davis, The Adm ira 1s Lobby, p. 236 .

V. Murphy, Fortune, p. 268.

,<‘9wi 11 i am Kaufmann, The McNama ra Strategy, pp. h9 <, 292. Ik

However, in a way, all these positive changes hurt his

chances in the Pentagon. The vigor and originality sweeping

around his office caused an aura of prestige. He quickly became

popular with Kennedy and Congress.The press found him to

be somewhat cool, especially after he hired a Press Secretary.

However, they also stood in awe at the rapid changes being

forced in the traditionally stagnant Pentagon.All this

caused a tremendous amount of anxiety and fear on the part of

the military personnel. Especially the Havy feared for its

very existance in what it saw as a move towards a centralized 1 52 Pentagon. Soon all the services began to complain of the

tremendous number of orders filtering down from the Secretary's office, and fought it for a while by passive resistance in 15 3 following all the orders to the letter. However, this played

into the hands of McNamara. Before the services realized what was happening, the Pentagon had been completely reorganized to

McNamara's wishes,

However, while there was extensive reorganization, there was no merging of the services. The exception of the defense­ wide agencies will be covered later. In fact, the implementation

* J. V. Murphy, Fortune, p. 102.

' ibid. , p. 268.

1 c 2 . Vincent Davis, The Admirals Lobby, p. 232.

* 53iipentagon C i v i 1-M i 1 i t a ry Friction Increases," Aviation Week and Space Technology LXXVI I (October 15, 1962), p" 26.

v. Murphy, Fortune, p. 273. 75 of PPBS was used by McNamara as a means to make necessary moves towards centralization without substantially undermining 1 5 5 the autonomy of the services. The move was quite successful in that centralization was achieved to an extent never reached before, while the services still played an integral part.^^

From this point, the example of FY 1963 can be used to analyze the budgetary process under McNamara. According to

McNamara, this was the first budget in which the processes of 15 7 PPBS were fully in operation. * The actual process began, as it had in FY I960, with the JSOP of the Joint Chiefs of

Staff.However, there were two large differences between the planning cycles in the two years. To begin, for the first time in recent years, the Secretary of Defense did not assign a dollar ceiling, either before or after the plans were *derived,

Although guidelines still severely limited budgetary freedom-, there was no dollar amount. Second, for the first time, the

JSOP in conjunction with the Secretary's guidelines was taken seriously as a budgetary *document.^®

1 c r J>William Kaufmann, The McNamara Strategy, p. 189. • * ^fi'iQe fense Budget Gets Unified for the First Time," Business Week #1692 (February 3, 1962), p. 76. 15 7 U. S. Congress, House, Subcommittee of Appropriations Commi 11 e e, Department of Defense Appropri a t i ons for 196 3, Part I , 87th Cong., 2nd sess. , p. 2. "*

1 C R Charles Hitch, Decision-Making for Defense, p. 31« 159 C. W. Borklund, The De pa rtmen t of Defense , p. 275. ^^Charles Hitch, Decision-Making for Defense , pp. 66-67. As already mentioned, it was planned that a five-year plan

•would be devised with dollar estimates to aid in the formulation

of the budget and to give a rough estimate of where the budget

was going in the future. This budget was kept up and revised each yearj^ The JSCP served as the basis for the requirements

of the five-year plan. However, the Secretary of Defense,

the President, and the National Security Council all could issue

directives having a direct influence on the outcome of the 1 ' ’ overall strategic plan. ' Therefore, the JCS lost power over

the formulation of plans corresponding to the increased signifi­

cance of those plans. HcNamara described the issues confronted

in the overall plan in a statement before the House Appropriations

Siibcomm i t tee :

Our first step in the formulation of the fiscal year I963 budget was to initiate a series of studies dealing with what we judged to be the most critical requirements problems. At the same time we began a detailed review and anaylsis of the Communist threat, now and in the future, based on the latest and best Intelligence information ava I 1 ab1e. •

While this was underway, requests were made from the

*°*Adam Yarmolinsky, Atlantic, p. 53.

162 1 '‘Keith Clark, The Pres i dent and the Management of N a t i ona 1 Secu r ity , p. 181. ^^Harry Howe Ransom, Can American Democracy Survive the Cold War?, pp. 95-97.

D e p a r t m e n t of Defense Anp ropr i a t i ons for 19^3, Part J_, p. Many of the procedures of the budget are documented within*McMamara’s statement on pages four, five and six. 77 departments to send budget requests to the Secretary's office, with no dollar ceilings assigned. However, while the "call

for estimates" did not include monetary ceilings, they did

include, "guidelines" put in terms of weapons and manpower which effectively informed the agencies of about how much they 1 6 5 were expected to spend. All this seemed to indicate a pro­

cedure much like the FY i960 process, in which the planning cycle and the budgetary cycle were separated. However, the

important difference was that the strategic plans were now to

be in effect for several years in advance with changes being made all during the year.. Therefore, the agencies had a planning guide for their budgetary decisions.

Th is" hope irnwed i a te 1 yy met with problems. It had been hoped

that by the device of spreading the plan out for several years

in advance, that individual changes could receive more and

better attention. In fact, a "Program Change Proposal" system was set up in which changes in the plan could be submitted at any time of the yearJ^ Changes were made at monthly inter­

vals, with the big changes coming in January to make the plan

agree with the budget requests. However, there was still a

tendency to bunch the changes into the last few weeks before

the budget, so that the plans were not entirely accurate and

lJPHarry Howe Ransom, Can Amer j can Democracy Survive the Cold War?, p. 102. 166 °David Novick, Program Budgeting, p. 101. 78 the changes did not receive the amount of attention that was hoped for.^^ The limit of time before budget submission was still the most important factor in limiting the attention each . 168 program received.

However, before analyzing th? budget angle in detail, some additional points should be made about the plan. Actually,

the formulation of the plan has been discussed very little in

literature because it seemed to ^ave been a very informal and haphazard process. The only clear point about the procedure was that HcNamara was in control of the disputes. When there was a conflict on a major level, tk'lamara was pretty well able

to determine which side would win out in the final plan. This was done ttftrrough th-e de v i ce of esing s ub j ec t / i s s ue forms, which became quite common at all level; of the formulation *process,^-

In these forms, the subject would be given along with the com­

peting alternatives for accomplishing the task. The use of

these alternatives forced issues to be simply stated.With

the alternatives before him, McNinnra was able to quickly

resolve disputes within the Pentagon of what objectives should 171 be pursued. However, there was one minor limitation to this

^^Aaron Wildavsky Public Administration Review, p. 306.

Harry Howe Ransom, Can An ; r i can De noc racy Survive the Cold War?, p. 8. '169 . ' vDavid Novick, Program Budgeting, p. 101.

^^William Kaufmann The He 'i.jma ra Strategy, p. 189. 171 Ibid. , p. /19. 79 power. When McNamara was met with a highly unified opposition on a matter of major strategic or personal importance, he was 1 72 usually forced to go along with the majority.

The reason why McNamara had to limit his role as arbitrator was the inherent structure of any bureaucracy. While the higher levels made most of the important decisions, they depended very heavily on the lower levels for raw research and data gathering to base decisions on. Of course, McNamara did much raw research himself by using his office safe for secret documents. However, there was still a considerable trade-off in which McNamara had 173 to grant favors to receive the cooperation of his bureaucracy.

The trade-off was particularly necessary in view of the novelty of what was taking place in the plan. Several details had never been figured before, and needed everyone’s cooperation to try to derive meaningful criteria. One of the more obvious examples was in the Navy, in which no criteria had ever been devised for figuring the age at which a ship was obsolete. 1 71< McNamara stepped in to help in this instance.

However, there were some individual directions in the plan which can be used to indicate the power involved in its formu­ lation.. As was already mentioned, McNamara came into office hoping to develop trends towards a hardening of the deterrence

1 72 Adam Yarmolinsky, Atlantic, p. 61. 173 e Wc r ne r H i rs ch , Pub 1 i c Administration Review, p. 260.

r l. l/ i 1 1 i am Kaufmann, The M c H a m a r a Strategy, pp. 18^-?5. 80

1 75 and an improvement of the limited war capability. In order to harden the deterrence, he hoped to fill the "missile gap" with missiles which were far more invunerable than manned bombers.

Eisenhower had warned that too rapid of a switch would weaken the deterrent, and this argument by the Air Force caused some 176 problems. In order to increase the limited war capability, he hoped to build the Army and other ground forces to fight a war without nuclear weapons, much as in the fashion of the

Korean War.

Plans and budgets before FY 1963 included expansions in the missile force, but a very strange switch was made with FY

1963» McNamara evidently became convinced, although he would not dare admit it, that not as much was needed in the missile deterrence as he had thought. Aircraft were continually cut back. However, by the beginning of the FY 19.63 budget, expend­ itures on missiles had leveled off.^7 |n factt expenditures

in the Strategic Retaliatory Forces category continued to drop for years after the initial investment in missile deterre nee.^8

However, in terms of power, this drop did not seem inconsistent with McNamara's wishes. Hitch later explained that the drop

175 I bid., p. 79.

*76DWjght Eisenhower, "Shift to Missile Warfare Must Be Made With Care," U. S. News and World Report XLVIII (February 8, I960), p. 101.

^77jame5 Trainor, "DOD Seeks Procurement Diversity," Missiles and Rockets XI (October 8, 1962) , pp . 16- 17• *7^Gerhard Colm and Peter Wagner, Federal Budget Projections (Washington, D. C., 1966), pp. 83-90. 81 came after the objectives in building missiles had been reached.^9

Evidently, McNamara became convinced that the election issue on

the missile gap was overstated, and that the limited increase

in funds was sufficient for the change to missiles. No evidence could be found that McNamara ever opposed the cuts in Strategic expenditures.

In the issue of limited war, the change was much more con­

sistent. Reversing the trend which had continued until the

FY I960 budget, McNamara drastically increased the manpower and strength of the ground forces. Within a very short period of time, the United States acquired a considerable limited war capability. In fact, many observers felt that the increase in the Army was McNamara's most noticeable achievement.^^

J One additional change was put into effect to increase the

limited war capability. As was mentioned in the FY i960 budget,

there was no immediate device for paying for any unexpected wars. Considering that the United States never officially expects any wars, this was a rather sloppy practice. However,

McNamara added a clause for Congressional approval in which

up to $150 million could be switched into paying for additional

troop -expenses. The Berlin crisis was handled under this pro-

179char1 es Hitch, "The Defense Sector: Its Impact on Amer­ ican Business," in Jacob Javits, e t al., The Defense Sector and the Arne r i c a n Economy (new York, I9"5*8TT P • ^7. 1 SO J. V. Mu rphy , Fortune, p . 278. 82 vision. Within the period in v/hich these funds v/ere being used, Congress would have time to appropriate more funds. This

adding-on technique greatly improved the limited war capabil­ ities. 182*

At the time that the "guidelines" were given to the ser­

vices, the budget formulation process was well underway. No

neat compilation of the process was given in the I963 hearings

as had been done in the 1$60 hearings. However, one was unnec­ essary due to the conspicuous lack of changes in the process despite the attempted application of cost/cffectivencss.

The process began with exactly the same procedure that

had been used in the pre-McNamara budgets. Service Comptrollers

and budget agencies received estimates from individual agencies

based on service plans. The first noticeable change came when

the guidelines were received from the Secretary of Defense.

Instead of complying with simple budgetary ceilings, the ser­

vices had to adjust their budgets to directives involving major

items of procurement and force levels. D This effectively

switched some power to the Secretary since more was adjusted to

suit his taste. However, the guidelines were still quite broad,

so that, with the exceptions of major weapons systems, there

lol Department of Defense Appropriations for 1963 , Part II, P. 99. 182 Ib i d., p. 100.

I O • ■’Harry Howe Ransom, Can American Democracy Survive the Cold War?, p. 103. 83 was considerable latitude in which specific systems would be

purchased.

Of course, McNamara also had the process of cost/effect-

i venes s which was supposed to have decisions which he could not

make come out in the way he would like. The possibility of

doing this had tremendous implications for the Secretary's

power, and it will be analyzed in some detail in this report.

Charles Hitch had nominally been in charge of implementing

the economic changes, although he was overruled in his treat­ ment of cost/effectiveness. He had originally planned to

implement cost/effectiveness over several years, allowing time

for adjustments. However, McNamara forced the plans through

more rapidly so that it was officially used in all decisions by the FY 196? development.^^*

However, the whole process met with immediate problems.

To begin, it was extremely difficult to accurately and conven­

iently launch the program without prior practice. Many of the

problems with the practicality of the plan sprang from cost/

effectiveness since the measure was supposedly used to devise

the plan. The primary reason for the failure of cost/effective

ness to be practical was that not all of the costs could be easily *figured.^

l^^Dav i d H o v ic k , Program Budgeting, p. 89.

1 p r ■’Charles Hitch, The Econom i cs o f Defense i n the Nuclear Age, p .• 169. 8A

The second problem was that the military personnel were

quite hostile to using the process. This was partially caused

by the impractibi1ity and obscurity of the process. However,

it was also caused by the resentment of the military that

McNamara was telling them how to handle their own part of the

process. There was also some confusion within the military as

to the implications of cost/effectiveness. Many seemed to feel

that it was a way of justifying the cheapest alternative on

each weapon system. However, whatever the cause, there was

almost no difference between the pre-1961 and post-1961 proce- 1 86 'dure of budget formulation except in the area of planning.

McNamara did make a strong attempt to get the system off

the ground. He did this, exactly as he did in formulating the

plan, by involving himself in absolutely everything possible.

Using the subject/1ssue forms, he made literally hundreds of decisions persona1 Iy^7*. However, while this practice forced

many of the decisions to go McNamara's way, it succeeded in

alienating the military personnel. The military felt that this

mass-production form of handling military problems was far too 1 38 superficial and not as complete as their long studies. As

a result, their opposition was reinforced.

*^David Novick, Program Budgeting, p. 100.

1 37 'Adam Yarmolinsky, "How the Pentagon Works," Atlantic CCXIX (March, 196?) , p. 60. 188 .Major General Max S. Johnson, "Story of a Pentagon Crisis," U,. S_. News and World Report L (June 12, 1961), p. 2 U. 85

However, two big results did show in the final budget as a result of McNamara's efforts. Firstly, rivalry between the services was considerably reduced. It was hoped that this would avoid duplication and waste. Secondly, there was a substantial move towards defense-wide consolidation of functions that could be more efficiently handled that way. Several agencies were formed because of their usefullness to all ser­ vices, and a few can be listed here. The Defense Intelligence

Agency, soon destined to rival the CIA with its new size, was I 90 formed to integrate the findings of the individual services.

A Strike Command was formed out of the Army and Air Force bodies 1 ° 1 for coordinated attacks. ' This was done since the two would attack together in virtually any type of war, and that required 192 maximum coordination.

Two movements towards coordination received special emphasis, and they will be covered individually here. First, to elimi­ nate the waste and duplication in procurement, as well as to watch for possible corruption, a single Defense Supply Agency was formed. It was hoped that this agency would handle all service requests for procurement, and would be easier to watch for wasteful or questionable expenditures. In doing this, the

l°3Larry Booda, Aviation Week and Space Technology, p. 26.

190 J V/illiam Kaufmann, The McNamara Strategy, p. 190. 1 9 1 J. V. Murphy, "Fortune, p. 104. • " i92wiil i am Kaufmann, The McNamara Strategy, p. 191. 86

agency was placed under the Secretary of Defense’s command, and the service chiefs and secretaries were removed from its

command.'-' At the time of the FY 1963 budget, this agency was still being developed. A Defense Stock Fund was set up 1 94 with a FY 1963 request of $3 billion for supplies. By 1 95 this time, 837 people were already employed by this agency.

However, despite the early stage of development, it was esti­ mated that more than $150 million could be saved in FY 1963 196 from the operation of the agency.

The second, and perhaps the most comprehensive movement

for coordination came in the field of research and development.

In addition to the Research, Development, Test, and Evaluation

categories left within each service, a RDT&E, Defense Agencies category was set up. Most of the projects handled by this 197 agency had previously been handled by the Army. Through

this agency, there was an attempt to strengthen research in

the individual services. For Instance, the Air Force's Research *1

•J . Murphy, Fortune, p. 104. 1 4 Department of Defense Ap p rop r ia 11 on s for 1963, Part I I , p. 264 .

* 95Department of Defense Appronri a t ions for 1963 , Part III, P. 766 . ——— — ——

1^^"McNamara Says Economy Steps Could Save $3 Billion Per Year,11 Aviation Week and Space Technology LXXVI I (July 16, 1962) P. 34.

*9 ^Depa r tmen t o f De fe n se Appropriations for 1963, Part V,, P- 25 87 and Development department was completely scrapped and reassem- 1 o g bled on functional lines. This was extremely important since the funds for research still came predominately from the I 99 services. In addition, there was a dual system set up to prevent waste and duplication in research. A Defense Science

Board was set up to watch general research outside the Pentagon so that, if it was useful, it could be used without duplication.

Also, a Director of Research and Engineering was established

to watch research within the various Pentagon agencies to avoid duplication.2^0 The result of all this effort was that the

20 1 quality of research within the Pentagon noticeably Improved.

In reference to this sector of the budget, Hitch stated during

the hearir^s that de frnse—spieTid i ng for items that could

be used widely was much more meaningful and less tied down than 2 0 2 previous, service allocations.

Two additional subject matters should be discussed before summarizing the budget.to this stage, and one is the question or corruption in research, selection, and procurement. A strong

J. V. Murphy, Fortune, p. 103. 199 ' Pepa r tme n t of De f e nse Appropr i a t i ons f o r 1963 , Part V^, p. 24. Figures can be found in Department of Defense App rop r i- at i ons for 1963 , Part I I, p. 165.

2°%epa r tment of Defense Appropriations for 1 96 3 > Part 11, p. 126. 2 0 1 W i 1 1 I am Kaufmann, The McNamara Strategy, p. 293 .

2 G 2 Department of Defense Anpropria t ions for 1 963 , Part I I, p. 261. 83 complaint has always existed saying that the industrialists and the military personnel have been a little too close socially, and that this arrangement led to "gentlemen’s agreements" in which the military personnel would recommend buying a company’s product in exchange for a lucrative job with the company upon retirement. Needless to say, that type of•arrangemcnt could have significant effects upon the final budget requests. In fact, Eisenhower i n^Va rewe 1 1 Address v/arned of the military- industrial complex and gave some credence to the fear that there was such an effect.'

There was little doubt that most of the scientists involved in research did have financial interests in the outcome of the 20 3 rese-arch. In the early 1960’s, the New York Bar Association made a study of the situation and concluded that the "Conflict- 204 of-Interest" laws were unenforceable. The problem was that the scientists working for the Pentagon or its subsidized con- tracters v/ere among the best, and could command high wages.

However, the Government simply did not have the money to spend.

As a result, the Pentagon had to accept highly needed scientists despite their financial ties with related agencies and sup- pliers. *20

253uscientific Advisers: The Current System of Getting 7 "ce Seems Awkward but Unavoidable," in "Science and the News," nee , p. 1 739. ZO/lbid. 20'5lbid. 89

One of the main points of many of the critics was that the suppliers were not required to stay with a certain price.

Instead, they were paid for the costs of production plus a fixed percentage as.a reasonable profit. Many saw this as senseless in a capitalistic economy. However, there was a very sound military justification for the practice. Bidding for a price meant that the company could receive only a fixed amount, regardless of the price of production. Therefore, if the company found that they drastically misjudged final costs during bidding, they would often have no alternative except to delay or abandon production in the hope of minimizing losses.

However, there was a feeling in the Pentagon that national de­ fense was too important to allow the. possibility that needed weapons would not be produced. Therefore, the company was guaranteed a profit regardless of cost so that they would devel­ op the weapons.

However, whatever the justification, the cost-p1us-fixed- fee type contracts became the symbol of corruption and had to go. tn their place, incentive contracts were soon advocated in which companies were penalized for not meeting deadlines or production standards. -McNamara soon began to boast of the 20 7 way in which cost-plus-6^ contracts were being eliminated. '

^^^Department of Defense Aporooriations for 1963, Part II, P. 157. 207 "McNamara Says Economy Steps Could Save $3 Billion Per Yea r * Av i a t i on Week and Space Technology, p. 50

He claimed that they had fallen from 3S% of all contracts in

FY 1961 to *332? of the contracts in FY 1962. By 1966, they had fallen to The exception of this trend came in response to another change to be discussed next in which the program definition phase of production allowed more cost- plus-65 contracts.2* ^

The second major change to be discussed before the summary of the budget formulation to this point involved research once again. McNamara contended that much of the research done was allowed only because it was so obscure that the budget author­ ities could not tell what it was about. For this same reason, contracting firms were allowed to engage in expensive research on nebulous and often useless wtapc^s systems. For this,

McNamara offered a solution which was designed to make clear exactly what was being researched before a tremendous amount of money was spent. To do this, he divided research into two phases, with a program definition phase to be completed before 210 full scale development. The purpose of the "program defini­ tion phase" was to fully define what was to be developed, how much it would cost, what it would do, and how it would contri­ bute to military strength. In this way, a selection could be made on whether to continue or abandon research before a tre-

20oCharl e s Hitch, The Defense Sector and the Amer i can Economy , p. k5.

2^"D0D Plans Changes in Systems Acquisition," Aviation Week and Space Technology LXX VI I (August 2 7 , 1 962), p. 2 7 . 2*®Robert /Art, The TFX Decision, pp. 9^'95. 91 mendous amount of money was invested in the project. McNamara

used the Skybolt missile, which was being developed at the time

he took office for use by the British, as the most glaring example of bad research. According to McNamara, the Skybolt

suffered tremendous cost overruns because no one had adequately

researched whether the performance promised could be delivered 2 1 1 for the price offered.

However, the services launch,ed some tremendous complaints against this practice. First there was the political angle, in which the services claimed that the tremendously detailed

"program definition phases11 demanded were actually being used

to stall development of systems rather than gain reasonable

knowledge of the systems. In addition, they complained that

funds for this phase were often withheld by the Secretary of

Defense so that the services would adjust their fiscal requests • 2 13 for the next,fiscal year.

The second p rob 1em was that the use of this dual process

led the services.to complain that projects were being forced

into delays and increases in price. In the Skybolt missile

already mentioned as fuel for McNamara’s argument, the services

complained that program definition further increased costs once

—— Larry Booda, "Defense Management Policies Irk Services," Aviation Week and Space Technology LXXV1I (August 27, 1°62) , p^ 26 .

2 1 2* I b i d .

2,3lbid. 52

implemented. in redefining objectives, much of the work already 2 1 done had to be scrapped. In addition, the TFX (F-lll) was

delayed in production due to the time required for program

de f i n it i on.2

However, what this did indicate was that McNamara was able

to watch the system rather closely with the help of the program

definition phase. The complaints could not have been made if

Hcllamara had not been able to watch what was going on, make

decisions, and enforce their implementation.

At this point, the budget can be summarized as it approached

submission to the Secretary's office. One important difference with the p re-ilctjama ra budget can be noticed almost immediately.

In the FY i960 budget process, McElroy was involved in handing

down the guidelines and in analyzing the requests from the

services. On the other hand, McNamara never left the services

alone. He insisted upon telling them how to run their part of

the process as well as personally running his own part. For

this reason, there was no clear military part and Secretary

of Defense part of the budget. This has caused a serious problem

in covering the budget formulation which could not be explained

until the process was reviewed to this point,. To be sure,

McNamara made significant changes in the budget result. However,

he caused the changes at scattered places throughout the process,

2 1 Z| I b i d .

215lbid . , p. 27. 93 and no one neat point can be chosen at which the changes took place. For that reason, this chapter must appear scrambled, and certainly roust lack the chronological precision of the second chapter. As an alternative, this chapter has tried to introduce changes at the point where they became most obvious.

A second point is related to the first, but still deserves being mentioned. Throughout, McNamara was much more involved in the whole process than any previous Secretary. Administra­ tively, he was incredibly active. The process to the point it has been covered proved the statoients made in the introductory chapter that McTlamara provided a true test of whether any qivilian could control the Pentagon.

'n addition, some statements should be made in summary of the comparison of the budget process and *f ch'ama r a1 s plans for it. Within the planning process, McNamara hoped to create a meaningful five-year plan which could be used for budgeting.

It was possible to do that because the plan was in continual ex i s tance and was sufficiently vague to be a guide and not a budget. At first, the plan faced the alternative of being entirely original and possibly not meeting the budget, or being

incremental and matching the budget. The budget could not be changed rapidly since it was forced into rigidity by the large percentage of expenditures going to highly stable goods. However the practice of keeping the plan in continual existance led to two results. First, it insured that changes would be incremental and possible to implement. S.-.condly, it served as a guide to 91. the budget formulaters for what was require.: As will be remem­ bered, the -plan was forced into being vague by the nature of the changing military requirements abroad and unpredictable price levels. For this reason, the budget makers were left with considerable flexibility in initiating new programs at this point in the process. Changes after this point could not be contributed to the plan, but instead to the political pressure in the confrontation with the Secretary-.

tt should also be noted, although it never seems to be, that in the short run, the budget ran the plan. The budget was guided by plans of the previous years. It could not consider changes in the new plan since the new plan was not issued until well into the budget process. However, and this was extremely important, the five-year plan was adjusted each year in January in what was its biggest adjustment of the year simply to comply with the budget request. Therefore, budget officers formulated a budget each year using as a guide their own previous year's request. As stated earlier, for all the decoration, there was no change at all in the meat of the formulation process.

Secondly, the change involving cost/effcctiveness , or the third part of McNamara's plan, can be reviewed. Here again,

McNamara was able to get a change implemented by demanding to see results. He got a five-year plan by demanding to see it.

He got cost/effectiveness by demanding to see alternatives in subject/issue forms. However, with all the strong oppos tion which was given to cost/effectiveness, there is little evidence o

that it was used sincerely. The problem was costs could not be adequately figured and effectiveness was strictly a matter of opinion or speculation." For this reason, traditional deci­ sions could be easily fitted into the cost/effectivencss rold without any change at all. In effect, people had always tried

to accomplish the most with the least money. in fact, the 200 or more decisions made by McNamara using the subject/issue

forms seem to be about the only ones made using that formal device.?^

Finally, the budget was submitted to the Secretary of

Defense for his consideration. It should be noted, since itc.'iamara made the distinction, that to this point the services had submitted "service proposals" and not budgets. The dis­

tinction was that these were lists of proposals with their

costs attached while the budget - requests would not be formally made until later. However, the distinction is one of wording

and not one of political power, so it will be ignored here.

McNamara stated of this part of the process:

The service proposals were received during July and August. Including civil defense and the military assistance pro- '/ gram, they aggregated over $63 billion in obligational authority.... Since these submissions were prepared unilaterally . by.each service, it is understandable that ■ * duplication and overlapping occurred in

zloThe 200 figure came from the Air Force Secretary as previously mentioned. The number for all the services is un­ known, •but, of course, is considerably higher. However, the point is that only the Secretary used .the device. 96

certain areas, particualrly the strategic retaliatory forces. The service proposals were consolidated and subjected to a systematic analysis by the OSD. With the assistance of our prin­ cipal military and civilian advisors, Mr. Gilpatric and I then reviewed in great de­ tail each of the programs in the light of-- 1. the mission to be accomplished; 2. the cost/effeetivencss relationships among the various alternative means of performing the missions; and 3« the latest intelli­ gence data on the capabilities of the Soviet Union and its sate11ites.'7

Unfortunately, the services were not asked how much they

had requested of the Secretary of Defense, so that comparisons

•with the final budget could be made. However, McNamara did

give these figures for all the services combined. He claimed

that the "service proposals" totaled $63 billion, as mentioned

above. After the rehashing which the quotation refers to, the

services then submitted formal "budget requests" which totaled

$5^.2 billion, and this was finally cut to the $51.2 billion 2 18 requested of Congress.

This totals a cut by the Secretary of Defense over two

phases of $11.4 billion, which indicates that the Secretary

played a tremendous role compared to the $300 million cut of

McElroy. However, it also- indicated a weakness on McNamara's

part in the earlier stages. If the changes and the subject/

issue forms had been successful through all this involvement,

2 * 7pepa r tme n t of Defense Appropr i a t i ons for I 9 6 3 , Part IV. p. 5. 21SIbid., pp. 5-6. 97 or if cost/effectiveness had been correctly used by the military budget makers, there should have been no necessary change at all. * However, KcHamara continued to run from the beginning to the finish, indicating that the budget was far from his liking.

His talk of rcevaluation and the use of 560 more individual decisions indicated that he was unsuccessful in establishing any scientific inclinations into his subordinates, at least to the extent that he wanted.

Finally, the budget was submitted to Congress in its offic­ ial form. However, before it is followed, two particular issues were important at this time, and gave particular insight into how McNamara's power operated within the Pentagon. Hopefully, they v/i 1 1 illustrate both the use of the s u b j ec t / i s s ue technique and McNamara's ability to change sections of the budget when he wanted.

The first issue involved the development of the B-70 air­ craft and the RS - 70 which it became. The Air Force had origi­ nally proposed a new bomber to replace the B-52's and B-58's which would be more versatile, invulnerable, and capable of carrying a heavier load. However, they met with opposition in the research stage by McNamara who decided that, in the true tradition of cost/effeetiveness, the effectiveness was not as high as the cost since existing weapons could be combined to

213lbid. , p. 6. ?3

2 2 0 create the same result.

However, what is extremely telling about HcMamara's power is that the program was not cancelled. There was a vigorous and continual debate between HcUamara and General LeM>ay over 22 1 the necessity of the aircraft. As a final result, both sides gave in. McNamara never did kill the program, as he was legally permitted, and the Air Force finally compromised with a proposal for a RS-?O (Reconnaisance-strike aircraft) in its 222 place. However, McNamara continued the fight, still con­ tending that the same duties could be handled by existing . 223 aircraft and missiles. During this general time period, the issue was in a slowly dying stalemate, in which thr»»

XB-70 (experimental bomber) tiTLiaft were to be tested. Finally the issue faded away, without a B-70 or RS-70 force.

This is a perfect example of McNamara's strength since it seems to be limited on the fringe. McNamara repeatedly avoided" confrontation, stalling in program definitions and s1ow devel­ opment so that the opposition would tire or become interested in something else. In this strategy he won, indicating a tre­ mendous amount of success and power. However, it also indicated

^^Oftobert McNamara, The Essence of Secu r ity, p. 92.

2 2 1 J. V. Murphy, Fortune, pp. 10^-05.

7^7 Department of Defense Appropriations for 1963, Part V, P. 7. : 2 2 3 "McNamara Views RS-70 as Doubtful Asset," Aviati'-n Week and Space Technology LXXVI (March 26 , 1 962) , p. 70~ 99 a limit on McNamara's strength in that, once the issue became highly publicized, he tried to win converts with his arguments while stalling for time. This supports the contention made earlier that McNamara had the bureaucratic control to order people to do things, but could not afford to do so without the tacit support or at least apathy of the bureaucracy.

The second case involved the TFX (Tactical Fighter-exper­ imental), or F-lll aircraft. It provides an interesting com­ parison in that it was a program which McNamara supported over the protests of the services instead of visa versa. Actually, the idea of a multiple use aircraft had been created by the 2 2 head of the Tactical Air Command during the Eisenhower years.

However, the multiple-use F-lll was very much McNamara's pet.

He adopted it because of its potential for solving many service needs within one aircraft.

McNamara followed his distrust of the services logically in that he let the Director of Defense Research and Engineering handle the development on paper. As expected, the services through joint meetings and their research and development branches soon announced opposition to the Idea. They felt that they were each going to be cheated in an aircraft which was designed to do many things, without doing any specialized task well.

From this point, the fight was on.

22Z

McNamara had originally planned on one basic pattern to devise three planes, one for each of the three services.

However, his arguments got him nowhere against an organized opposition, and he finally consented to let the Army design drop from his recommendations. From this point, the develop­ ment went almost as it had in the B-?0 case. The services constantly voiced as unified an opposition as they could get, trying both logical arguments and political persuasion. In addition, they carefully altered their arguments to appeal to McNamara personally, since they realized that he was the one that they had to convince. On the other side, McNamara met with much stronger and more unified opposition than he had figured, end he slowly and cautiously -gave in when the cost was too great to stand fast.

Once again, the pattern remained the same in a major fight.

McNamara seriously desired the multiple aircraft, and was willing to push his power to the limit to get it. Once again, he suc­ ceeded. In fact, no major fight could be found in which McNamara did not salvage at least an extremely favorable compromise. On the other hand, the services were unified against his program in the firm belief that McNamara was unqualified, and wrong, in making his decision on the TFX.^25 The trade-off pattern per­ sisted between the clear leader and the bureaucracy.

One final aspect of the budget must be covered before it is

C. W. Borklund, The Department of Defense, p. 279. 101 left, and that aspect is the sv'itch in form to the programming budget. One of the thr.te phases of McNamara’s plan concerned converting the budget to meaningful categories in which military functions instead of military operating costs would be shown.

These categories were /■?'ived by the time that McNamara obtained office. Kennedy immediately arranged for the presentation of the defense budget to Or.egress in both forms as soon as he n 2 6 became President. *■ I r. this way, the previous service budgets were unified by function so that there was clearly a defense 2 2 7 budget as opposed to several simultaneous service budgets.

In fact, by the announcement of the I'Y 1963 budget, the press briefing was given the figures only by program and not by ser­ vice.(However, the budget has continued to the present time 2 2 9 to be submitted to Cctvjmss in both forms.

However, mere formation of the program budget did not mean that it would change anything or make it more easily understood.

The case for programming rested on the assumption that the form of the budget would change the behavior of the people devising . 230 it. It was hoped that it would cause decision-making to be

Harry Howe Ransom, Can Am? r i c a n Democracy Survive the Cold War?, pp. 108 S 132.

22?je Murphy, Fortune, p. 104.

2 8 "Defense Budget Gets Unified for the First Time,” Business Week, p. 76. 2 29 JAdam Yarmolinsky, Atlantic, p. 58. 2 30 J Allen Schick, Public Administration Review, p. 257• 1 02 based on totally encompassing rather than incremental consider- 231 ations. It Is in this area that one of the trite and almost unanimous conclusions of the scholars must be challenged. Sev­ eral works have calmly stated that the effects of the programming 2 32 budget have been significant.

However, this report must disagree with any significant contribution credited to programming in the defense budget.

To begin, the naive assumption that budgeting can be based on totally inclusive rather than incremental grounds is not only unfounded, but dangerous. It was already stated that the budget was changed at monthly intervals through debates on specific issues, and was changed in January to match the budget. To handle the planning or budgetar/ phases without working from the old budget would lead to drastic and impossible changes almost every time one of the basic assumptions was revised.

When this happened, the budgeters would be faced with two alter­ natives. They could proceed with a plan which had no relevance to the new budget, or they could try to change the day-to-day existance to meet the new budget with all the resulting chaos and crippling dislocation which that wnuld bring. Budget imple- menters forced by circumstance to begin with their material

! h i d.

''"Cij'les Hitch, Oecision-Makin-'i for De f e n s e , p. 39; and Jerry Srs’.ie, "Civilian on Horseback?" in Andrew/ Scott and Ra ymo n 3 Dawson ( e d . ) , Readings i n the ' a '< i ng o f Ame r i can Foreign 3ni:c'- (m-w York, 19657^ p^ . 103 base and make any changes Incrementally on the base material and procedure. This meant that, not only would things be dis­ located by a new budget, but they would probably not bring the system any closer to the plan. For these reasons, incremental changes were desirable and were used. Of course, that limited the possible role of the programmed budget to making the budget easier to understand in changing it later. However, even this advantage met with serious problems.

The reason the plan could not be significantly understood from the new form was that the categories were imperfect and incomplete. Weapons such as the B-52’s could either be included in one category or be divided between them. However, either result could cause serious problems to anyone reviewing the budget for the purpose of making cuts. If the total cost of a system was Included in one category, that category would be overweighted with that item, and would be due for a cut. However to cut expenditures on the system would affect other categories without regard for the need in those areas. If the cost were divided, cuts in the categories where the system contributed l.east would affect the other categories, again without consid­ eration of the needs. In addition, so many of the systems complemented each other that even a list of the weapons in each category would not help. The result of this situation was that any division which did not make all systems exclusive to one category with all their complements was highly misleading for lot

2 3 3 anyone trying to compare the budget divisions. As a result, while the budget was more understandable on the surface, it was limited for policy uses. The contention that it helped in policy has not been supported in theory or practice.

The budget in this form was submitted to Congress in early

January, 1962. In keeping with his habit of interfering in everything which concerned him, McNamara spent an unusually high number of days testifying before various committees in 2 34 Congress. He soon became widely known for his willingness to talk and his incredible memorized knowledge of specific points in the budget. During these hearings, the Congressmen seemed concerned most about the diminishing military role in defense budgeting and McNamara's reliance on missiles for nuclear policy.

During these hearings, one final point arose in the power play, and the same problem had been mentioned in McElroy's day.

The persistent belief by many that the military men were censored in their testimony was fed by McNamara's obsession on stopping security leaks, which had always been used by the military as a political weapon.^36 por this reason, McNamara wrote and highly publicized a directive stating that the military witnesses

^33/^ai-on Wildavsky, Public Administration Review, p. 303.

V. Murphy, Fortune, p. 104.

^^^William Kaufmann, The McNamara Strategy, pp. 203 S 240-1.

2 3 6 Stewart Alsop, The Saturday Evening Post, p. 46. 105

237 were expected to stick to the budget as it was prepared.

However, the directive seemed to be a political move by McNamara to persuade the military to stick to his budget rather than an order or threat of reprisal. In the House Appropriations

Hearings, he stated that the memo did not apply to answering 238 questions about one's personal opinion. Once again, whether the directive had any effect cannot be answered definitely since it involved the lack of action rather than action. However, no evidence could be found that there was any censoring beyond the traditional pressure by the Secretary not to himiliate him as had been done in the past. There were considerable complaints

-against McNamara's style in the Pentagon and they were hardly censored into well kept secrets.

To summarize an entire chapter of this length is difficult and unnecessary. The significance of the processes have been ' summarized within the chapter when they were covered, and this

-was done Intentionally to explain significance while the details were still fresh. The final chapter tries to explain why the changes had varying successes.

jack Raymond, Reporter, p. 33-

^^Robert McNamara, "The Secretary of Defense," tn Henry Jackson (ed.), The National Security Council (New York, 1961), p, 232. CHAPTER V

POLITICS IN THE PENTAGON

On the second page of the thesis, the purpose was given

as spelling out "the changes McNamara hoped to establish in

the Pentagon, how successfully he implemented them, and what

his success and failures implied about the possibility of

civilian control over the Department of Defense." The first

two objectives have been covered In the last three chapters.

However, to cover one man as an isolated figure in history would severely limit the scope and significance of a paper dealing with "Political Science." Therefore, the first two objectives can now be used to derive the nature of relations

in the Pentagon and the influence they will have on the future of civilian control within the Department of Defense.

in order to do this, this chapter will introduce several

characteristics held by all bureaucracies. The examples from

McNamara's experience will then be applied to fill in the

specifics of the Pentagon bureaucracy at the time he held office

Finally, this description will then be used to analyze the

possibilities for future civilian control within the Department

of Defense. Of course, the characteristics listed here will

be extremely limited and will not even constitute a model in

the traditional sense. Instead, they will be limited to those

characteristics which directly relate to the purpose of this

study. 107

(Two characteristics which all bureaucracies can be assumed

to have are that they are compartmentalized and that they strive

as a unit towards an objective or set of objectives. If there was no compartmentalization, the group would become a unit and would not fit into the traditional mold of a bureaucracy.

However, the second characteristic needs a little more expla­

nation. It is not the purpose of this paper to introduce a

full definition of a bureaucracy, since most of it would be

irrelevant for this study. However,' it will be assumed that

the entire group.must be organized towards obtaining some

goal or set of goals, and it is for this reason that they work

together in the first place., This limitation omits both compet­

itors who compete against each other for a common goal and

unrelated groups that work in the same place for different goals.

It should be noted that, since competitors are eliminated

because they act independently, the subgroups of the bureaucracy

must show a dependence on each other. This means that there

must be a division of labor between the groups, and that each

group must have the subordinate goal of accomplishing its part

for the bureaucracy to produce the final result.

This characteristic of an alignment of compartments to

achieve one overall goal defines the difficulty which any admin­

istrator will have in running a bureaucracy. The more that

the goals of the subgroups of the organization contribute natur­

ally to the overall goal of the bureaucracy, the easier the ‘

bureaucracy is to run. Marx envisioned the perfect bureaucracy 108 of society, in which the parts (humans) contributed through their subordinate goals (human drives as conditioned by commun­ ism) to the overall goal of adequate production to sustain life comfortably. With the goals of the subgroups alighed in this perfect fashion, no bureaucratic control would be necessary.

From this point, the Pentagon can be fitted into the frame­ work. ihe single goal of virtually every military man in the

Pentagon Is to prepare to fight a war. For this reason, his subordinate goal is not a good Army, or a good Air Force, but a good total fighting force which will be capable of winning a war. Such men would be invaluable as leaders of a single­ branch military. Unfortunately, with the historic separation of the services, each military man was forced to plan to meet

this goal within his own single service. As a result, if an > Army man felt that an airplane was needed, he wanted it in the

Army and not the Air Force. This tendancy can be easily veri­ fied by looking at the incredible amount of interservice rivalry which has been present, even to the extent of each service owning identical weapons. What this meant was that, even after

the establishment of the Department of Defense in 19^7, the

armed services remained a set of competing bureaucracies under one unnatural leadership.

'The result of this competing alignment of subgroup goals was that McNamara was left with three possib1e a 1ternatives when he entered office. First, he could have ignored the sit­

uation and let the rivalry continue. This had been the func- 109 tiona 1 solution of the p re v i ous Secretaries when they found themselves unable to do anything else. Second, he could have tried to rearrange the goals of the services so that they would have combined to reach the Departmental goal of winning wars.

Third, he could have regulated the output of the services so they would be forced into supporting their part whether they

liked it or not. The second alternative had the advantage that, once it was done, little future supervision was needed. The third had the advantage that it was much easier to direct, supervise, and enforce. This meant that changing subgroup goals was the desirable alternative since, if it could be done,

it would cause the bureaucracy to operate in the future with minimum supervision. The subgroups would no longer have the desire to conflict with their role. However, It involved a psychological change rather than simple obeisance, and for this

reason was much more difficult to put into effect. The third alternative of regulating output could be enforced much easier by simply checking the output. However, to substitute this method for changing goals meant that every output had to be checked indefinitely since the outputs were contrary to the desire of the subgroup. Within his three-part program, McNamara utilized both.of these last two methods.

The change in planning was an attempt to change the goals of the services by regulating their output. He directed that a plan which was relevant to budgeting be produced, and the 110 production of a plan could be enforced by simply checking to see if a plan emerged. However, there were two faults with

McNamara's hopes that caused him to fail in changing service goals. First, while he could check for the production of a plan, he could not check to see if all the details of the plan were produced for the goals he wanted. Despite his constant interference in the formulation process, he could not find the time or assistance to watch over all the complexities of the plan to assure that they would produce a meaningful budget­ ary document. As a result, despite the improved qualities of the plan, it remained so unrealistic that it was overhauled each January to match the budget request. The second problem was that the plan was a symptom of the competing service goals, and not the Instrument through which they were perpetuated. r The services used the budget requests for their plans, in that it was these that determined what would be purchased and accom­ plished. For these reasons, while the plans became more accur­ ate and meaningful, they served as better indicators of future budgets, and not as guides for them.

' McNamara aimed his other two changes at the hedrt of the problem--the budget. Programming, once again, was easy to implement in that McNamara could simply ask to see the budget in programmed form. ' However, programming served as a tool for

McNamara to check what was going on later rather than as a tool for budget formulation. As covered in Chapter IV, there is no evidence that budget personnel used the programming technique 111

to determine their estimates. McNamara failed in this technique because, while he provided the services with a tool for changing

their practices, he provided no incentive for them to use then..

They were able to satisfy the requirements of a programmed budget by putting the budget requests into programmed form.

However, it must not be overlooked that the budget in this

form did provide him with a much more convenient way of checking and .interfering in individual disputes. This was to aid in the

third segment of his plan, budgeting. In fact, it could be claimed that planning helped in this same way by letting him know where the programmed budget was not meeting standards.

However, there is little evidence that McNamara seriously used

the plan to determine security needs. In fact, with the plan

altered to meet the budget, there was little use in using it.

However, all the elements mentioned so far played a part

in the final struggle, that to implement the budgeting system of cost/effeetiveness. in this case, McNamara met a practice of budgeting which had hardened into a goal of the service in deciding its part of the budget process in its own way. Each official had decided what was necessary to meet the Communist

threat (for some reason, the threat was always from the Commu­

nists) and which methods were valid for testing his conclusions.

The interference of McNamara was seen as trying to take from

the service the right to decide what the country needed. Also,

McNamara was not requiring a document, as he had done In plan­

ning and programming, but a process which had to change everyday 1 1 2 service activity to be implemented at all. This had two results in terms of the framework set up for a bureaucracy. First, the service had to violate its own goals to follow orders.

There was no way to crank out a document which it could then

ignore. Secondly, if McNamara were to enforce the process, he would have to watch every move in the Pentagon.

The result of this struggle paved the direction for all relations in the Pentagon, not to mention the conclusions of this paper. The problem is that the fight resulted in a stale­ mate in which both sides sufficiently embarrassed the other with their victories, but neither could claim to have won.

McNamara's weapons consisted of interference through himself and his subordinates tn a way which has never been seen before or since from a Secretary of Defense. He made literally hundreds of decisions personally. In each, he demanded that subject/

Issue forms be drawn up so that the military would have to use his system. On the military side was the continued practice, fed by the resentment of McNamara personally, of the same old subjective and personal methods for deriving budget requests.

In effect, they used McNamara's system only when McNamara per­ sonally asked for it to make a decision on his own. The result of all this was that the budget represented neither point of view, but instead a haphazard combination of the two in which there was no continuity at all. McNamara's influence could be isolated by looking at those issues in which he personally inter­ fered. In those issues, he was almost completely in control. 113

On the other hand, the military influence could be seen by looking at all those decisions in which Mcllamara was not in­ volved. In those, the military was almost always completely in control.

However, while this seems like a nebulous answer to a one hundred and thirteen page question, it is not at all. It means th.it' the best way which has been found to control the

Pentagon consists simply of the dirty work of getting in per­ sonally, and doing absolutely everything possible. However, an administrative genius, the quality of which may occur only at sparce occasions, was able to manage nothing more than a rough stalemate.On the other hand, McElroy, who was considered by his pears to be extremely intelligent administratively, became completely trampled in the battle. This does not present a bright picture for future Secretaries.

The first alternative, that of letting the rivalry continue, was one that was used before and since McNamara. However, this paper has tried to find other possible alternatives. The third alternative listed earlier, that of altering the output of the services, was proved impractical by the lesson of McNamara’s experience. The second alternative, that of changing service goal.s, is the only one left. However, it was mentioned earlier that the second alternative is by far the most difficult to

implement. If it is to be done, it will require time and some

technique which has not yet been devised. This thesis will not

try to supply that technique. ^Instead, it has analyzed the 11 best attempt .to date and concluded what has not yet been accepted by Secretaries of Defense or Presidents--that the present methods must inevitably fail. Bl BL IOGRAPHY

BOOKS:

Art, Robert J. The TFX Deci s i on. Boston, 1968.

Borklund, C. W. The Department of Defense. New York, 1968.

Men of the Pentagon. New York, 1966.

Clark, Keith, and Laurence Legere. The President and the Management of National S e c u r it y. New York, 1969.

Colm, Gerhard, and Peter Magner. Federal Budget Projections. V/ashington, D. C., 1 966.

Davis, Vincent. The Admirals Lobby. Chapel Hill, North Carolina, 1967.

Hammond, Paul. Organizing for Defense.=Princeton, 1961.

Hitch, Charles. Deci s ion-Making for Defense. Berkeley, 196?.

------, and Roland McKean. The Economics of De fense i n the Nuclear Age. New York, 1 ‘960.

Jackson, Henry, ed. The National Secu r jty Council. New York, 1961.

Javits, Jacob, e t al. The Defense Sector and the American Economy. New York, 1968 . •

Kaufmann, William. The" McNamara Strategy. New York, 1964.

McNamara, Robert. The Essence of S e c u r it y. ■ Hew York, 1968 .

Mosher, Frederick C. Program Budgeting: Theory and Practice. New York, 1954. ,

Novick, David, ed. P rog ram Budgeting. Cambridge, Massachusetts, -1967.

Peter, Laurence, and Raymond Hull. The Peter Principal. New York 1969.

Ransom, Harry Howe. Can American Democracy Survive the Cold War?. Garden City, Mew York, 1964. 116

Raymond, Jack. Power at the Pentagon. New York, 1964.

Schilling, Warner, et al. Strategy, Poli t i c s, and Defense Budgets. New York, 1962. •

Scott, Andrew, and Raymond Dawson, eds. Read!n q s i n the Maki ng of Amer i can Fo re i g n Pol icy. Mew York, 1965 .

Smith, Bruce L. R. The RAND Corporation. Cambridge, 1966.

Smithies, Arthur. The Budgetary Process in the Uni ted States. New York, 1955.

Wildavsky, Aaron. The Politics of the Budgetary Process. Bos ton, 1964.

MagazInes1

Al sop, Stewart. "Master of the Pentagon," Saturday Evening Post, CCXXXIV (August 5, 1961), 21 , 45 - 46.

Booda, Larry. "Defense Management Policies Irk Services," Twrrr^Aviation -7WeekTr. ------and Space Technology, LXXVII (August 27.

nnc^amara pu$hing USAF-Army Rivalry," Aviation Week and Space Technology, LXXVI I I (January 14 , 1963) > 26 - 27.

Eastman, Ford. "Broader Planning Role Seen for Defense," Aviation Week and Space Technology, LXXIV (January 2, I96I) , Id - 19.

Eisenhower, Dwight. "Shift to Missile Warfare Must Be Made With Care," U_. S_. News and World Report, XLVIII (Febru­ ary 8, 1960), 101.

Kirsch, Werner. "Toward Federal Program Budgeting," Pub 1i c Administration Review, XXVI (December, 1966), 25j - 270.

Johnsen, Katherine. "New Budgeting Plan Shifts Rivalry From Services to Weapon Systems," Aviation Week and Space Technology, L X X V (July 31, I 9^ I) » 24.

Johnson, Major General Max S. "Story of a Pentagon Crisis," U. S. News and World Reno r t, L (June 12, 196 1 ), 74. 117

Kiker, Douqlas. "The Education of Robert McNamara," Atlantic, CCXIX (March, 1967), .49-55.

Murphy, Charles. "The Education of a Defense Secretary," Fortune, LXV (May, 1962), 102-105, 2od, 273-274, 278-2/9.

Raymond, Jack. "Mr. McNamara Remodels the Pentagon," Reporter, XXVI (January 18, 1962), 31 - 3t>.

Schick, Allen. "The Road to PPB: The Stages of Budget Reform," Pu b 1 i c Administration Review, XXVI (December, 1966) , 243-25o. ■ Trainor, James. "DO D Seeks Procurement Diversity," M 1 s s i les and Rockets , XI (October 8, 1962) , 16 - 17.

Vildavsky, Aaron. "The Political Economy of Efficiency: Cost- Benefit Analysis, Systems Analysis, and Program Budgeting," Pub 1i c Administration Review, XXVI (December, 1966), 292 - 310.

Wilson, George C. "Defense Budget May Aid Service Unity," Aviation Week and Space Technology, LXXVI (January 15. 1 962) , 2o.

Yarmo)insky, Adam. "How the Pentagon Works," Atlantic, CCXIX (March, 1967), 56-61.

"ODD Plans Changes in Systems Acquisition," Aviation Week and Space Technology, LXXVII (August 27, 1962), 27.

"Defense Budget Gets Unified for the First Time," Business Week, ^1692 (February 3, 1962), 76 - 77.

"McNamara in Control: A Firm Hand at the Pentagon," U_. S. News and World Repo r t , LI (October 2, 196 1) , 63 - o7. ~*

"McNamara Says Economy Steps Could Save $3 Billion Per Year," Aviation Week and Space Technology, LXXVII (July 16, 1962), 34.

"McNamara Views RS-70 as Doubtful Asset," Aviation Week and ' Space Technol ogy, LXXVI (March 26, 1962) , TT.

"Pentagon Civi1-Mi1itary Friction Increases," Aviation Week and Space Technology, LXXVI I (October 15, 19o2), 267

"The P.evolution in the Pentagon: McNamara's Way," Newsweek, .LIX (March 12, 1962), 26 - 30. 118

“Scientific Advisers: The Current System of Getting Advice Seems Awkward but Unavoidable," Science, CXXXIV (December 1 1961 ), 1739.

GOVERNMENT PUBLICATIONS:

U. S. Congress, House, Subcommittee of Appropriations Committee. Pepartment of Defense Appropriations for I960. 6 vo1s. 86th Cong. , 1st sess., 1959.

U. S. Congress, House, Subcommittee of Appropriations Committee. Pepartment of Defense Appropriations for 1963. 6 vo1s. 67th Cong. , 2nd sess. , 1362.